Deutsche Bahn Interim Report January – June 2017 Quality that persuades ! At a glance

H 1 Change

Æ † Selected key figures [€ million] 2017 2016 absolute %

KEY FINANCIAL FIGURES (€ MILLION) Revenues adjusted 21,070 20,033 + 1,037 + 5.2 Profit before taxes on income 733 563 + 170 + 30.2 Net profit (after taxes) 779 603 + 176 + 29.2 EBITDA adjusted 2,574 2,415 + 159 + 6.6 EBIT adjusted 1,179 1,007 + 172 + 17.1 Equity as of Jun 30/Dec 31 13,446 12,744 + 702 + 5.5 Net financial debt as of Jun 30/Dec 31 19,030 17,624 + 1,406 + 8.0 Total assets as of Jun 30/Dec 31 56,102 56,623 – 521 – 0.9 Capital employed as of Jun 30 34,581 33,462 + 1,119 + 3.3 Return on capital employed (ROCE) (%) 6.8 6.0 – – Redemption coverage 1) (%) 19.3 17.5 – – Gross capital expenditures 4,108 3,472 + 636 + 18.3 Net capital expenditures 1,490 1,346 + 144 + 10.7 Cash flow from operating activities 762 1,523 – 761 – 50.0

KEY PERFORMANCE FIGURES Passengers (million) 2,355 2,190 + 165 + 7.5 RAIL PASSENGER Punctuality DB passenger transport (rail) in (%) 94.6 94.8 – – Punctuality DB Long-Distance (%) 81.0 78.4 – – Passengers (million) 1,294 1,151 + 143 + 12.4 thereof in Germany 1,030 1,006 + 24 + 2.4 thereof DB Long-Distance 68.3 66.7 + 1.6 + 2.4 Volume sold (million pkm) 46,536 44,037 + 2,499 + 5.7 Volume produced (million train-path km) 391.5 377.3 + 14.2 + 3.8 Freight carried (million t) 139.2 140.2 – 1.0 – 0.7 Volume sold (million tkm) 47,756 47,830 – 74 – 0.2 RAIL Punctuality in Germany 2) (%) 94.2 94.2 – – Punctuality DB Group (rail) in Germany (%) 94.5 94.6 – – Train kilometers on track infrastructure (million train-path km) 534.2 531.4 + 2.8 + 0.5 thereof non-Group railways 164.3 158.4 + 5.9 + 3.7 share of non-Group railways (%) 30.8 29.8 – – Station stops (million) 76.4 75.9 + 0.5 + 0.7 thereof non-Group railways 18.0 17.4 + 0.6 + 3.4 BUS TRANSPORT Passengers (million) 1,060 1,040 + 20 + 1.9 Volume sold 3) (million pkm) 3,701 4,087 – 386 – 9.4 Volume produced (million bus km) 815.4 823.1 – 7.7 – 0.9 FREIGHT FORWARDING AND LOGISTICS Shipments in European land transport (thousand) 50,751 50,712 + 39 + 0.1 Air freight volume (export) (thousand t) 613.1 550.6 + 62.5 + 11.4 Ocean freight volume (export) (thousand TEU) 1,063.4 976.3 + 87.1 + 8.9

OTHER KEY FIGURES Order book passenger transport as of Jun 30/Dec 31 (€ billion) 94.1 92.1 + 2.0 + 2.2 Rating Moody’s /S&P Global Ratings Aa1/AA– Aa1/AA– – –

Employees as of Jun 30 (FTE) 307,565 302,692 + 4,873 + 1.6

1) Change in method at the end of 2016 [2016 INTEGRATED REPORT, PAGE 84 F.] with retroactive adjustment. 2) Non-Group and DB Group train operating companies. 3) Excluding DB . DB2020+ strategy

Our customers benefit from first-class and environmentally friendly mobility and logistics solutions driven by dedicated employees and digital expertise.

Environmental dimension Eco-pioneer Social dimension Top employer

Economic dimension Profitable quality leader

WE DRIVE PROGRESS AND SHAPE THE FUTURE

Culture of quality Operational excellence and customer focus

Digital expertise Innovative solutions in our core and new businesses

High performance Shared responsibility and strong performance Contents

1 Chairmanʼs letter

2 Interim Group management report (unaudited) 2 Overview 2 DB Group 5 Business and overall conditions 12 Profitable quality leader 21 Top employer 23 Eco-pioneer 25 Development of business units 47 Additional information 48 Opportunity and risk report 48 Events after the balance sheet date 49 Outlook

52 Consolidated interim financial statements (unaudited) 52 Consolidated statement of income 53 Consolidated balance sheet 54 Consolidated statement of cash flows 55 Consolidated statement of changes in equity 56 Segment information according to segments 58 Notes to the consolidated interim financial statements

U5 Contact information and financial calendar

≈≈ Cover image: VDE 8 – ICE on the Scherkondetal bridge In 1991, after the reunification of Germany, the Fed- eral Government created the German unification transport project no. 8 (Verkehrsprojekt Deutsche Einheit; VDE) in order to improve transport connec- tions by rail between east and west and between north and south. The new expansion line, approxi- mately 500 km long, between , Erfurt, /Halle and will be fully operational on December 10, 2017. The new high-speed line provides a competitive and environmentally sound alter­ native to travel by road and plane Berlin – ­­ in under four hours – the service offered byDB Group from De­­cember 2017 will make traveling easier and more comfortable, directly benefiting about 17 mil- lion people in Germany. We are also on the right path in terms of punctuality. in terms right path We the on also are achieved. previously achieve an is succeeding. Weis succeeding. in have wind the – our right path the on wethat are confirm Conclusion: numbers The our customers. to service reliable more and even better allow to this area provide us to op ­all, however,devel the with still we satisfied are not Over high at percent. the level of 93.2 stable mained re punctuality In transport, regional half of 2016. first in than the more points This is 2.6 percentage half 2017. of first in the percent of 81.0 punctuality wean aver achieved transport, In long-distance DB our international activities in and particular units, our business across achieved broadly were ments that improve pleased 17.1 We particularly are percent. and percent, by 5.2 Revenues increased of our success. evidence are lion of enues positively. developed also Rev Revenues profits and half-year. in afirst ever before than – more trains tance 68 than more half 2017, visible. of increasingly first In the becoming achieved halfour in 2017. of first in the successes The attractive more become to continued Bahn Deutsche Dear ladies and gentlemen, lion more revenues and intend to increase revenues to over to revenues increase to intend financial year. 2017 the for We our forecast mulating in for ambitious more For we have this been reason, RAILWAY FUTURE THE OF RAILWAY FUTURE THE OF ment of our punctuality. More effort is needed in needed is of our punctuality.­ment effort More Arriva,

billion and adjusted adjusted and billion € 21.1 DB EBIT , and and Cargo, million passengers used our long-dis used million passengers of at least at of

EBIT

million more € 100 DB program was up by an impressive was

€

2.2 Schenker. quality program are program quality

billion. This is This billion.

billion and € 42.5 EBIT of EBIT

bil € 1.2

€ 1bil than than age ­­age ­ - - ­ - - - ­ -

of Bahn Deutsche of Board Management of the our favor, we have off. yet not taken mentally but We tion. We are working with start-ups and technology technology and start-ups Wetion. with working are in digitaliza We make continuing to progress also are of the tion Berlin new commissioning of the A ever before. than – more of stations maintenance and modernization customer. the for We are investing, improvements where are noticeable day.every of making objective mind the in – keeping discipline focus and with areas these challenges.we We still face in working continue must in others, but areas, in some have achievements made CEO Dr. yours, Sincerely persuades! that than: Quality less no will be in 2017 focus the of our customers interest in the Because tion. us.This This is drives is our ambi what trend. upward main tocan we yet finish. at the willWe do everything not but right path, the thing is on we clear: are One our customers. for service and improve quality too, is further here, to aim The models. business develop new to partners fundamental step forward for our customers is the is the our customers for forward step fundamental ihr Lutz Richard and Chairman Chairman and tain the positive momentum and continue the the continue and momentum positive the ­­­tain – Munich and the parallel occurring introduc Munich occurring parallel the and ICE Railway of theFuture program “The numbersconfirmthat we

4 in December 2017. 4 in December are ontherightpath –our

€ AG 5.5 is succeeding. billion are being spent on the the on spent billion being are ICE high-speed connection connection high-speed DB Group a bit better a bit better Group CHAIRMANʼS LETTER ”

- - -

¥ ECO-PIONEER † TOP EMPLOYER ¿ PROFITABLE QUALITY LEADER Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Interim Group management report (unaudited)

Overview

Railway of the Future Financial indicators Good development program successful with clearly in noise reduction positive development and air quality control

≈≈ ¿ Profitable ≈≈ † Top employer ≈≈ ¥ Eco-pioneer quality leader ◊◊ Number of employees ◊◊ Development of a new ◊◊ Punctuality data positive increased further. climate protection target in compared to 2016. ◊◊ New employer branding cooperation with the ◊◊ Passenger record campaign started. science-based targets initiative. in long-distance transport. ◊◊ Two regional Railway ◊◊ DB Cargo achieves good ◊◊ Revenues and EBIT improve of the Future workshops progress in noise reduction. significantly. carried out. ◊◊ DB Regional operates largest bus fleet with EuroVI emissions standard.

DB Group

New Chief Executive Officer Strategy DB2020+ sets Railway of the Future improves named the right focus quality and performance

≈≈Changes in the executive bodies 2017. Parliamentary State Secretary Uwe Beckmeyer (Federal Ministry of Economics and Energy, BMWi) was appointed ≈≈ Changes in the Management Board as her successor to the of DB AG with The appointment of Dr. Rüdiger Grube as a member of the effect from March 3, 2017.

Management Board of DB AG was rescinded by mutual Fred Nowka resigned his Supervisory Board mandate with agreement with effect from January 30, 2017. effect from April 30, 2017. Falk Sobek of the District Court At the meeting of March 22, 2017, the Supervisory Board of Charlottenburg was appointed as his successor to the appointed Dr. Richard Lutz as a member of the Management Supervisory Board of DB AG with effect from May 12, 2017.

Board of DB AG for another term of five years, through March 21, 2022, and appointed him Chief Executive OfficerCEO ( ). ≈≈Implementation of Also at the meeting of March 22, 2017, the Supervisory capital increase Board appointed Berthold Huber and Ronald Pofalla as members of the Management Board for another term of At the end of June 2017, the Budget Committee released the five years, also through March 21, 2022. second half of the planned DB AG equity increase by € 1 bil- lion. The unblocking was subject to the condition that the ≈≈ Changes in the Supervisory Board pro rata resources of the performance and financing agree- In the context of her appointment as Federal Minister of ment (Leistungs- und Finanzierungsvereinbarung; LuFV) II Economics and Energy, Brigitte Zypries resigned from the for 2016 were fully implemented in accordance with the

Supervisory Board of DB AG with effect from January 26, terms of agreement.

2 !!!

OVERVIEW / DB Group

≈≈Implementation DB2020+ strategy We want to generate enthusiasm through digital services, the highest level of performance in automated rail opera- The orientation of DB Group associated with DB2020+ tions and a tailor-made portfolio for our customers – based sets the right priorities to make the Group fit for the future. on mobility and logistics platforms. This is also reflected in the economic results. We are work­ In order to reach our targets, we need a high-perfor- ­ing on the issues that will help us to both optimize our core mance foundation. To this end, we are working on a culture business and take advantage of international growth and leadership that motivates our employees to achieve the opportunities. highest levels of performance, while at the same time Within the framework of RAILWAY OF THE FUTURE , building up competencies in the organization, especially we have eliminated major annoyances for the railway in in the direction of digitalization and process excellence. Germany and for our customers as well as significantly We will also improve the control logic of DB Group in improved the quality of our services. This applies, among order to work more forcefully. Besides the railway in Ger- other things, to punctuality, passenger information and the many, we want to focus even more on growth opportunities cleanliness of stations. The focus now is on stabilization by in our international business. creating suitable structural frameworks. We have also made significant progress in digitalization.­­­­­ ≈≈Implementation of With the appointment of a Chief Digital Officer, the found­­ing Railway of the Future of DB Digital Ventures GmbH and the devel­opment of the Group-wide ACCELERATORS BEYOND1435 Œ [WWW.BEYOND1435.COM­­ ] “Eliminating annoyances” was the target we had set our- with our partner PLUG AND PLAY Œ [WWW.AXELSPRINGERPLUG­ AND­ ­ selves for 2016 with RAILWAY OF THE FUTURE – this has ­PLAY.COM], we have put our digital ecosystem firmly in place. been achieved in most divisions. In 2017, the focus is on As part of our digitalization strategy, we have for­mulated stabilizing the positive developments. areas of action based on technology trends for our digital activities and developed roadmaps for their implementation. ≈≈ Punctuality improved After having successfully implemented a number of We still have our target in view for 2017 of 81% punctual long-­ Group programs, we are working on new and further devel- distance trains, and are on track. We will achieve this, for oped Group programs on topics with which we would like example, through PLANSTART [2016 INTEGRATED REPORT, PAGE 14 F.]. to take another step towards the future. This helps ensure the more punctual departure of our ◊◊ We will significantly increase the reliability, flexibility long-distance trains. As of 2018, we aim to ensure that and the transport capacity of rail with the Railway Auto­ 90% of all long-distance trains depart the stations in ques- ma­­tion Group program (Automatisierung Bahn­betrieb; tion on time, compared with 76% as scheduled in 2016. ABB). In addition, the focus of PlanStart is being systematically ◊◊ With the Group program Smart Cities, we will develop ex­­pand­ed, for example by looking at other stations and new, intelligent mobility, logistics and station concepts stopping trains. for urban areas. Systematically cutting vegetation will further reduce ◊◊ With the Group program Non-European Operations the impact of trees that fall on the rail network during (NEO), we intend to exploit business opportunities storms and help prevent delays. in the railway business outside Europe, particularly in the Middle East and the Asia-Pacific region, and bring ≈≈ Improvement of availability of our DB network and expertise to bear on the railway elevators and escalators business here. The ELEVATORS AND ESCALATORS AT STATIONS [2016 INTEGRATED The focus now is on the implementation of these topics. In REPORT, PAGE 18 F.] have automatically reported disruptions the railway in Germany, we need to work more forcefully, since 2016. All 3,100 conveyor systems are equipped with a especially in our three strategic areas of action: quality, module for remote monitoring, which transmits distur- digital expertise and high performance. bances digitally and in real time to the operations centers. We want to offer products and services which convince This system makes it possible for us to commission and our customers: reliable, high quality and safe – always and carry out repairs faster. everywhere. The basis for this is operational excellence in all our processes.

3 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

≈≈ Passenger information improved Competence Center for Digitalization ◊◊ The wagon orientation is correctly displayed for almost In addition to the development of the digitalization strat­ 100% of all ICE trains. IC trains will be the focus in the ­egy, the CC is also working on the development of digital second half of 2017. products. ◊◊ Information on track changes is displayed 90% correctly ◊◊ The start-up support in DB MINDBOX Œ [WWW.DBMINDBOX. in the top 10 stations, so we are still below the target COM] was expanded: for example with the new program value (97%). Improvement measures have been initi- BEYOND1435 Œ [WWW.BEYOND1435.COM], one of the worldʼs ated. At the top 50 stations, our 87% accuracy exceeded leading innovation platforms. our target (85%). ◊◊ WHAT3WORDS Œ [WWW.WHAT3WORDS.COM], a global address ◊◊ The so-called static delay forecast for long-distance and location service, is a new start-up affiliated com- transport achieved a stable prediction accuracy of 85%. pany under the umbrella of DB Digital Ventures. To further improve the result, we are working with ◊◊ A Group-wide intrapreneurship program was developed T-Systems on a dynamic forecast based on a big-data for our employees, which gives them the necessary free­ approach. ­dom and provides comprehensive support to launch as ◊◊ Further development of the passenger information plat- a start-up under the umbrella of DB Digital Ventures and form. This platform bundles together all the relevant to realize new products relating to mobility and logistics. passenger information input data from the train oper- ating companies and infrastructure. Competence Center for Transformation Since the beginning of the year, the CC has been supporting ≈≈ New Competence Centers established the quality and digitalization efforts of DB Group and the We have set up three Competence Centers (CC) to fulfill business units by establishing concepts to improve the our quality promise over the long term. performance and increase the motivation of the workforce. The core task of the CC is to enable/drive the digital and Competence Center for Operational Excellence conventional transformation of the entire organization in The Competence Center for Operational Excellence (OPEX) the interest of our customers. addresses quality and efficiency improvements in the rail­ ­way in Germany and pursues a zero-error principle in this ≈≈ Railway of the Future conference respect. It targets quality improvement, strict customer continued orientation and profitability in the production processes. The 2016 Railway of the Future conference, in which 1,000 ◊◊ An important step towards achieving the goal of “zero people were trained as Railway of the Future multipliers, errors” in the rail system is the establishment of a new will continue in a new format in 2017. The multipliers instrument for increasing punctuality – the so-called exchange information in five Railway of the Future action lost units. The advantage over the current control over workshops and are inspiring further colleagues for RAILWAY delay minutes is that lost units focus on all punctuality OF THE FUTURE . errors and less so on the duration of the delay. ◊◊ In maintenance, an OPEX program will be rolled out in ≈≈ Dialog forums on Railway of the two waves in 2017; others will follow. The first wave, “16 Future carried out Flagship Sites,” was launched in February. In early Au­­ In May 2016, the first Railway of the Future dialog forum gust, the second wave will start with 23 additional sites. took place with some competing railways. After that forum, ◊◊ In May 2017, the OPEX core module “Bauen im Verbund” there was criticism from the industry that the RAILWAY OF (BiV) was launched at DB Netze Track. The objective THE FUTURE program was mainly geared to DB Group here is to coordinate construction activities to a greater and tended to exclude the competitors. We are taking this extent across the business units in order to further min- into account by organizing the Quality and Punctuality imize the impact on punctuality. External train oper- dialog forum twice a year. The first one was held in June ating companies are involved via the “Construction Site 2017. At these forums, recommendations were taken up and Management Round Table.” it was made clear that many of the Railway of the Future measures contribute to better quality and punctuality, which verifiably benefit the entire industry. It was also agreed to include suggestions from the participants for fur- ther implementation. The participants of the event gave a very positive welcome to this kind of direct exchange.

4 DB GROUP / Business and overall conditions

Business and overall conditions

Economic environment World trade strengthened Burdens from the regulatory improved through investments environment

The developments as described below are partly based on In Germany, the dampening effect of resurgent inflation on provisional data or data not relating to the same time period, private spending is somewhat stronger than in other coun- as complete information relating to developments over the tries of the eurozone. In terms of overall economic growth, first half of 2017 was not yet fully available at the time this however, this is offset by rising investments. In Great Britain, report was prepared. however, growth slowed further at the beginning of the year. The sharp rise in inflation following the Brexit deci- ≈≈Economic environment sion is noticeably dampening consumer spending by private households. However, in accordance with our expectations, ≈≈ Assessment of the economic climate the British economy avoided slipping into recession. by the Management Board ◊◊ Stronger trade growth is strengthening global transport ≈≈ Energy markets in motion demand, particularly on intra-Asian routes and the routes The central hedging policy of DB Group is based on the to and from Asia. prin­­ciple of minimizing energy price fluctuations. Our activ- ◊◊ The economic environment, which is especially im­por­tant ities are therefore not exposed to the full impact of changes for the logistics activities of DB Group, has improved, in market prices. particularly in Germany and Europe. ◊◊ The structural change caused by the energy transition Delayed reduction of the oil oversupply of the German economy is having different effects on modes of transport. Change H 1 ◊◊ The labor market recovery and rising incomes in Europe Brent crude oil [USD/bbl] 2017 2016 absolute % provide support for mobility demand in our markets. Average price 52.7 45.1 +7.6 +16.9 ◊◊ The respective state policy frameworks, which vary Highest price 58.4 57.9 – – greatly in Europe, have a significant impact on compe- Lowest price 44.4 27.1 – – Year-end price 47.9 56.8 –8.9 –15.7 tition and market development in the more regulated Source: Thomson Reuters passenger transport markets. Oil prices fluctuated in a relatively narrow range, with a ≈≈ Rising global investments slight decline in the first half of 2017. However, the average strengthen world trade price was about 17% above the previous yearʼs level. Despite The global economy regained momentum at the start of OPEC efforts to counteract this and growing de­­mand in the year. The main reason for this is the faster-growing in­ India and China, production and inventories remain at a vestments. In addition to government investments in China, high level, limiting the price increase trends of the previous the recovery of global commodity prices is also contributing year because the reduction in OPEC production has been to the growth of demand for capital goods in commodity offset by other countries (especially the US). ­exporting countries. Stronger global investments are also the main reason behind growth of trade and production in Europe. Under- pinned by improved global demand and a stable domestic economy, overall economic growth in the eurozone acceler- ated somewhat at the beginning of the year. Private house- holds are benefiting from the ongoing recovery on the labor market.

5 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Electricity market is closely ≈≈ Developments in bond markets correlated with coal market Change H 1 (percentage Change Yield (%) 2017 2016 points) H 1 GERMAN BUNDS (10-YEAR) Developments in energy prices 2017 2016 absolute % Average yield 0.33 0.13 0.20 BASE LOAD POWER (FOLLOWING YEAR) (€/MWH) Highest yield 0.51 0.58 –0.07 Average price 30.0 26.6 +3.4 +12.8 Lowest yield 0.15 –0.20 –0.05 Highest price 31.5 35.8 – – Half-year end yield 0.47 0.20 0.27 Lowest price 28.0 20.7 – – Source: Thomson Reuters Year-end price 30.8 31.4 –0.6 –1.9 EMISSIONS CERTIFICATES In the first half of 2017, the yield on the ten-year German (€/TON CO₂) Federal bonds (bunds) was slightly above the previous Average price 5.0 5.4 –0.4 –7.4 Highest price 6.5 8.3 – – yearʼs level in total. While the US Federal Reserve Bank Lowest price 4.3 3.9 – – (Fed) raised its key interest rate from 0.50% to 1.00% in Year-end price 5.0 6.6 –1.6 –24.2 two interest rate hikes in 2017, the European Central Bank Source: Thomson Reuters (ECB) maintained its loose monetary policy. Indications of the ECB at the end of the first half of the year were that While the electricity spot market remains volatile, the elec- they would tighten monetary policy to a small extent, but tricity futures market for base load power, which is more this directly led to increased yields. The shift from low-in- material for DB Group, was significantly more stable than terest bonds into stocks with higher returns also contrib- in 2016. However, the average price in the first half of 2017 uted to the rise in yields. was higher than in the first half of 2016. The German elec- tricity futures market showed a strong correlation with the ≈≈Varied developments coal market, which had rising price trends. in relevant markets Emissions trading is strongly dependent on the reforms discussed for the fourth trading period. The proposals of the ≈≈ Passenger transport EU Environment Committee for a greater reduction of emis- Continued growth in the German market sions certificates was rejected by the . The overall market at the beginning of 2017 with moderate growth in volume sold was below the level of the first half ≈≈ partially recovers losses of 2016. Significant influences were: During the first half of 2017, the value of the euro rose ◊◊ Continued positive, but less dynamic, development of against most currencies after having lost value in the employment figures and disposable income with rising second half of 2016. In addition to specific effects on indi- inflation. vidual exchange rates, the reasons behind this included a ◊◊ Solid performance growth of motorized individual trans- rise in political uncertainty in Europe. port despite increasing, but still low, fuel prices in com- REVENUE DEVELOPMENT [PAGE 13 F.] of DB Group was also parison over several years. influenced by the effects of currency exchange rates. These ◊◊ Despite stoppages of strikes, moderate increases in mainly resulted from the development of the British pound, domestic air traffic due to the expansion of available because demand decreased sharply as a result of the uncer- offers, primarily from Eurowings. tainty about Brexit. Despite a significant depreciation of the ◊◊ For the first time since market liberalization in 2013, US dollar in the first half of 2017, the exchange rate was shrinking performance of long-distance bus services slightly higher compared to the first half of 2016 because it after the consolidation wave at the start of the year. had risen sharply at the end of the previous year. ◊◊ Rising price levels of motorized individual transport and Overall, exchange rate effects reduced the indebted- long-distance bus services with comparatively mod- ness of DB Group. They were driven by the trend in the erate rail price increases at the same time, and stabi- British pound and the Swiss franc, in particular. lized flight prices after several years of decline. ◊◊ Missing day of service due to leap year effect.

6 !!!

Business and overall conditions

Rail passenger transport Momentum towards increased competition, growth and in­­ ◊◊ Significant increase in volume sold in the first quarter novation­­ were seen, for example, in the following countries: of 2017 (+2.4%) in long-distance rail passenger trans- ◊◊ , with long-distance transport concessions port compared to the same quarter of the previous year, and the emerging competition between regional railways supported by the continued solid income and employ- BLS, SOB and SBB. Liberalization of the long-distance ment situation as well as rising fuel prices. bus market under discussion. ◊◊ Regional rail passenger transport with strong growth ◊◊ , with the establishment of a joint venture by the in the first quarter of 2017 +( 2.7%), continued strong Italian state-owned railway (FS) and British FirstGroup competition, DB Regio with significant increase in per- to apply for franchises in the UK – Italy, however, still formance through strong demand for S- Bahn (metro) does not have a competitive awarding of tenders for services and tender won in Schleswig-Holstein. transport contracts. ◊◊ Long-distance rail passenger transport with solid growth European rail passenger transport recorded a significant in the first quarter +( 1.8%), driven by DB Long-Distance. increase in volume sold. Noticeable gains, not just in Ger- many, but also in: Public road passenger transport ◊◊ , through strong demand for high-speed intercity ◊◊ Stagnating volume sold with opposing segment devel- transport services with PKPʼs new Pendolino trains, opment; public road passenger transport with adverse ◊◊ Spain, through the push for sales of cheap tickets for segment development; growing regional bus services high-­speed intercity transport services and RENFEʼs and shrinking long-distance bus services. quality improvements, ◊◊ After the shutdown of operations of blb and Postbus, ◊◊ Belgium and France, through renewed confidence in the the long-distance bus market is shrinking considerably. security situation after terrorist attacks in the previous With the insolvency of Deutsche Touring and the acqui- year, sition of ÖBBʼs long-distance bus brand Hellö by FlixBus, ◊◊ Switzerland, through recovery of traffic to France, as providers continue to consolidate. Market leader FlixBus well as SBB savings tickets in the competition for long-­ expanded its offer based on seasonal factors and in­­ distance bus services. creas­­ed its market share to about 90%. IC Bus is cur- Long-distance bus services in Europe, despite consolida- rently the third-largest supplier, with a market share of tion of providers with further expansion of available offers. about 2%. The price level rose considerably, by about The development is mainly driven by market leader FlixBus, 20%, after the wave of consolidation. which wants to increase its European passenger numbers ◊◊ Regional bus services recorded a moderate increase in by about one-third in 2017, to 40 million: performance in the first quarter +( 1.1%) thanks to rising ◊◊ FlixBus established a subsidiary in Copenhagen for fur- population and employment figures, particularly in met- ther expansion in Scandinavia and opened a domestic ropolitan areas. DB bus services recorded declines as a network in in April 2017. result of slackening demand for local services in rural ◊◊ FlixBus will take over Hellö, ÖBBʼs long-distance bus areas and adjustments to the portfolio of services. brand, effective July 2017, and will announce further net- work expansion in Austria. Europe-wide gains for trains and buses ◊◊ In April 2017, in cooperation with bus company Simet, The development of the European overall market in many Italian railway FS announced its own long-distance bus European countries at the beginning of 2017 was support­ed brand, Busitalia Fast, which will initially connect 90 by positive, but weakening, environmental influences with cities in Italy and will be expanded throughout Europe, moderately increasing employment and available real in­­ in a similar fashion to FlixBus. come. Compared to leap year 2016, a missing day of service dampened demand. Electric vehicles are becoming more and more relevant for tenders and fleet renewals in bus transport throughout Europe, supported by potential diesel driving bans in many cities.

7 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

≈≈ Freight transport and logistics Road German freight transport ◊◊ By our own calculations, increase in volume sold of By our own calculations, the strong overall market growth about 4.5% by May 2017. in the first quarter of 2017 compared to the first quarter of ◊◊ According to the toll statistics issued by the German 2016 of the previous year is exaggerated by a working-day Federal Agency for Freight Transport, in road perfor- effect of three additional business days. The performance mance development an increase in trucks registered in increase continued to be driven mainly by road freight traffic: German of 2% contrasted with an increase of more than ◊◊ Robust economic effects from trade and domestic 8% in trucks from abroad. Of these, trucks from Poland, demand. Croatia, Romania, Bulgaria, Lithuania and Slovenia con- ◊◊ Non-cyclical special items such as severe weather, low tinued to record above-average performance. Vehicles water, closure or conversion of coal-fired power plants from non-EU countries also recorded strong growth. and quality losses dampen development, mainly by rail ◊◊ Continued strong momentum from the construction and inland waterways. industry, foreign trade and positive consumer sentiment. ◊◊ Price and competitive pressure remain high both among ◊◊ Despite rising diesel costs in the first months of 2017, and between the various modes of transport. road transport continues to profit from still low diesel ◊◊ In inland waterway transport, the weak development of price levels compared to previous years. On the spot the previous year continued in the first quarter of 2017. market, transport prices in the first quarter declined Low water levels in the area of previous records, which noticeably. caused a decline in performance by almost a quarter by February, as well as the suspension in March of shipping European rail freight transport market on the Danube, the Main and the Main-Danube Canal above previous year’s level due to extensive maintenance and repair work on locks Year on year, volume sold in European rail freight transport drove traffic down by almost 13%. (EU 28, Switzerland and Norway) rose in the first quarter of 2017 by about 5%, with positive impacts coming particu­ Rail larly from growth in Germany, Poland, Great Britain, Austria ◊◊ In the first quarter of 2017, rail freight volume sold rose and Sweden. The performance increase is supported by the by almost 3%. However, taking into account the positive revival of production and foreign trade. Positive momentum working day effect of the Easter holiday, the plus must was generated here mainly from transport through the ARA be considered on a relative basis and is likely to have ports (, Rotterdam and Amsterdam). Combined weakened considerably in April. transport is the growth driver of rail freight transport. ◊◊ The development is also dampened by significantly neg- After double-digit declines in the last two years, volume ative special items. As a result, in connection with the sold of rail freight transport in Great Britain rose again. significant amount of construction activities and severe Based on the very positive development in metal, building weather damage, operations were impaired nationwide. materials and intermodal transport, the first quarter of 2017 ◊◊ While on the one hand the performance development recorded a strong increase of almost 5% compared to the of DB Cargo benefited primarily from strong impulses same period of the previous year. The decline in coal trans- from the steel industry, on the other hand the portfolio port continues, but has slowed significantly. Consequently, adjustments of the energy producers had a negative DB Cargo UK recorded slight growth in the first half of 2017. effect through the closure of coal-fired power plants The leading market position was maintained. and the conversion from coal to gas. In addition, serious After stagnating in 2016, rail freight transport perfor- quality losses led to noticeable intramodal and inter- mance in Poland rose by 6% in the first quarter of 2017. The modal shifts. positive development was supported by an increase in steel ◊◊ After strong growth of a solid 15% in the first quarter of and ore . Intermodal transport increased by 2016, the increase of the non-Group railways was some- almost 32%. DB Cargo Polska developed in line with the what weaker by March 2017. Development was mainly market in the first half of 2017. In particular, the automotive slowed by traffic losses to DB Group in the paper sector, and intermodal transport markets performed positively. below-average participation in the positive develop- ments in steel, and declines in the chemicals, coal and goods sectors.

8 !!!

Business and overall conditions

After the decline by about 5% in rail freight traffic in France Persisting momentum in contract logistics in the previous year, the volume sold development stabi- In the market for contract logistics, the growth rate con- lized at the beginning of 2017. The demand is supported tinued in the first half of 2017. Growth momentum remains by the positive development in the metal and consumer strong, particularly in Asia. Demand for dedicated indus- goods industry. (ECR) under­performed trial and automotive solutions improved slightly. the market. DB Schenker achieved revenues adjusted for exchange rate effects of 5.7% in the first half of 2017. Growth in European land transport After getting off to a modest start, volumes in the Euro- ≈≈ Increasing demand for rail infrastructure pean land transport market experienced a significant pos- Demand for train-paths increased in the first half of 2017 as itive development starting in March 2017. Up until May demand in passenger regional transport and freight trans- 2017, the overall market developed positively. port rose. Growth in regional rail passenger transport is Price trends have not yet benefited significantly from mainly driven by the increase in regionalization funds. The the increased demand. Consequently, the price level in the increased sales volume in freight transport is primarily first few months of the year – also influenced by the still low based on the positive development of combined transport. diesel price – was at a low level. For the second quarter of Infrastructure demand was largely stable in long-distance 2017, indicators suggest a slight recovery in the price level. rail passenger transport. The market situation is also reflected atDB Schenker. In the first half of 2017, the number of regional rail pas- Shipment volumes and revenues rose significantly in the senger transport station stops was 0.7% higher than in the core business in the first half of 2017 (load transport and first half of 2016. Non-Group railways further increased general cargo). their share by winning regional tenders.

Strong development in air freight ≈≈Developments in the political The global air freight market developed by May 2017, well environment above the same period in the previous year, at 6%. This development is mainly driven by a capacity bottleneck in ≈≈ Regulatory and transport policy ocean freight, which has caused loaders to increasingly topics in Germany change their modes of transport. Review of station pricing system continues Trade routes between Asia and the US and from Europe Since April 2017, two procedures have been in place to to Asia were particularly affected. approve the 2018 station price list presented by DB Sta- According to the scarce cargo space, air freight rates tion&Service AG as well as the preliminary review of the developed at a consistently high level of about 6% above corresponding fee policies. The focus of the two proce- the level of the same period in the previous year since the dures is on the changes in the pricing system, which were beginning of 2017. required because of the new fee regulations under the DB Schenker recorded growth in volume of 11.4% in the Rail­way Regulation Act (Eisenbahnregulierungsgesetz; first half of 2017. ERegG), which came into force in September 2016. This applies, in particular, to the provisions of Article 37 of the Continued growth in ocean freight ERegG, which contain strict guidelines for determining the With growth of about 3% through April 2017, global ocean station prices in regional rail passenger transport. The freight performed well in the first half of 2017. This positive BNetzA concluded the preliminary review procedure for development is mainly driven by the intra-Asian trade route fee policies in May 2017 and did not object to it. The Federal as well as by trade routes from Asia to other regions. agency also launched a subsequent investigation into indi- Currently, improved utilization of capacity can be seen vidual fee policies. Currently, the process is still ongoing. with the effect of a recovery in rates. The consolidation of Completion of this process and the fee approval process is shipping companies into large alliances in the ocean freight expected in October 2017. market is continuing. In May 2017, the BNetzA concluded the procedure opened DB Schenker recorded growth in volume of 8.9% in the in February 2016 for the review of the cost base of the 2014 first half of 2017. station price list, without any material complaints.

9 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Decision on the 2018 train-path pricing system compliance with the ban on the transfer of public funds for By the decision of February 6, 2017, the BNetzA approved the operation of rail infrastructure to transport services. the fees and fee policies for the new DB Netz AG train-path For the implementation of the judgment, we must bear in pricing system for the 2017/2018 schedule. The decision mind that the current legal framework has undergone sig- contained modifications to a few of the fee applications. nificant further development by the ERegG, among others. DB Netz AG on the one hand, and DB Regio AG and DB Fern­ ­verkehr AG on the other, brought a lawsuit and re­­quest­­ed ≈≈ Regulatory and transport an interim injunction. In June 2017, all three companies filed policy topics in Europe a complaint with the Appellate Administrative Court in EU supports German transport projects Münster against the rejection of applications for interim Within the framework of the Connecting Europe facility, injunctions by the competent Administrative Court in on June 23, 2017, the Commission proposed a total of Cologne of May 2017. € 2.7 billion for 152 Central European transport projects. The se­­lected measures in Germany include low-noise Review procedure according to braking systems, especially for freight trains, or the use of new incentive regulation the ERTMS (European Rail Traffic Management System) on Under the new incentive regulation framework under the major European freight transport corridors. A project to ERegG, the BNetzA must set a price ceiling for train-path build up a fast-charging network for electric vehicles in Ger- usage fees for the first regulatory period (2019 until 2023). many and other EU countries was also selected. Requests In the first process step, the so-called initial basis of the from DB Cargo in the amount of € 10 million were taken into overall costs must be approved for this purpose. DB Netz AG account. These include the conversion of freight cars to had determined this on the basis of the base years 2014 low-noise brake shoes, the ERTMS conversion of locomo- until 2016, until the first year of the regulatory period and tives as well as the hybridization of the 294 series. The submitted for approval to the regulatory authorities in April proposal must still be approved formally and officially 2017. By decision of June 28, 2017, the BNetzA set the initial adopted by the Commission at the end of July 2017. level for the overall costs below the requested value. The reduction is mainly due to reductions in cost of capital and Regulatory changes in Italy secondary costs as well as reductions in carryforwards. There have been a number of important regulatory changes DB Netz AG is checking the decision and will, if necessary, in Italy which, among other things, are intended to foster file an appeal. competition and ensure a stable financial framework. In ad­ ­dition, investments in infrastructure and the local transport Decision on the contract violation proceedings fleet were announced. The rules for opening up the market of the EU Commission and better public financing are beneficial for DB Arriva Italy. On June 28, 2017, the European Court of Justice (ECJ) issued its judgment on the contract violation proceedings ≈≈ Further development of the traffic by the against Germany to confirm and regulatory framework potential breaches of European railway law. The Commis- Higher EEG surcharge sion had brought a lawsuit against Germany at the end of The Renewable Energy Sources Act (Erneuerbare-Energien-­ 2014 and made four accusations, which included profit Gesetz; EEG) of 2017 stipulates an EEG levy on railways for transfer within DB Group, the accounts of the infrastruc- traction current amounting to 20% of the full EEG surcharge ture operators, the use of access charges by DB Netz, and as part of the “special equalization scheme.” In 2017, the EEG the separate designation of public subsidies for public surcharge increased by 0.526 cents/kWh compared to the trans­­port services at DB Regio. The ECJ largely rejected the previous year to 6.88 cents/kWh. This resulted in an in­­crease Commissionʼs arguments. It is only with a view to the ex­­ of the EEG rate for traction current to 1.376 cents/kWh. ternal disclosures of the accounts that the ECJ establishes a contract violation. At the time of the lawsuit, the Federal Republic of Germany had not undertaken all the necessary measures to ensure that the accounts system would ensure

10 Business and overall conditions

New legislation for bus services in the UK Network Modernization Act adopted The new legislation on bus services in the UK (Bus Services The new Network Modernization Act provides, among Act) was passed in April 2017. This could allow some UK other things, for the restructuring of the so-called avoided cities to introduce bus franchising, as is already the case in grid charges. For the determination of avoided grid charges Greater London. There could be potential opportunities to for locally controllable systems, and consequently also for support patronage growth through greater collaboration the traction current plants, the calculation basis is frozen with local authorities. at the 2016 level. In addition, certain cost components, such as offshore connection costs, are factored out. The changes Follow-on regulation governing equalization will be effective in 2018. payments for level crossings The equalization payments made by the Federal Govern- Regulations on automated driving ment for level crossings offset half of the costs incurred for On March 30, 2017, the German Bundestag adopted regula- operating and maintaining the crossings used by both rail tions for driving vehicles with highly and fully automated and road vehicles. The payments will run until the end of driving systems. The law makes it clear that the operation 2017 on the basis of European (EEC) regulation 1192/69, of motor vehicles using highly and fully automated driving which has been in force since 1969. Following the consoli- systems is permitted “in accordance with its intended pur- dation of existing EU legislation as part of the fourth rail­ pose.” If, for example, the automated driving system is only ­way package, appropriate connection regulations at Federal designed for use on highways, the vehicle may not be used level will be necessary from 2018. on other roads. The law also regulates liability issues.

Prohibition on the operation of New regulations on road traffic loud freight cars approved On May 31, 2017, the Commission presented its recommen- The law banning the operation of loud freight cars envis- dations on the “Europe on the Move” strategy. The purpose ages a complete ban on the use of loud freight cars starting of this strategy is to further regulate market access and with the 2020/2021 working timetable. In addition, the law social conditions in road freight traffic. The application of provides for certain exceptions and exemptions: for ex­­ minimum wage laws to truck drivers, stricter regulations on ample, the use of loud cars, based on case-by-case examina­ driving and rest periods, and simplified cabotage regula- tion by the infrastructure operator. This requires that, by tions are intended to improve road safety, combat illegal specifying a reduced speed, the noise emitted by a train employment and ensure appropriate conditions for workers. with loud freight cars is not louder than that emitted by a A further focus is on proposals for fairer, more environmen- train with refitted cars. The exception is restricted to non-­ tally friendly and standardized toll collection in the EU. scheduled transport. Additional proposals, including on market access for long-­ distance buses, on emissions standards for passenger vehi- Master plan for rail freight transport presented cles, and, for the first time, for heavy commercial vehicles, On June 23, 2017, Federal Transport Minister Alexander are planned for the coming 12 months. Dobrindt presented the “Master Plan for Rail Freight” as part of a cross-industry initiative. The master plan proposes concrete measures for sustainably strengthening rail freight transport by 2030. The plan is made up of ten measures that include both entrepreneurial and political tasks to im­­prove the competitiveness of rail freight. The planned reduction in the train-path pricing is of special note. The negotiations between the Federal Government and DB Netz AG for the implementation of this project should be completed by the end of 2017. In addition, the master plan includes the con- struction of test field in Munich for the automation of train formation as well as a capital expenditure program for the modernization of rail freight transport.

11 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Profitable quality leader

Punctuality at a stable Revenues increased – Economic position stable level overall significant improvement in profits achieved

≈≈Punctuality has increased ◊◊ DB route agent (DB Streckenagent) is now available significantly in long-distance for customers using local transport. It provides infor­­- ma­tion on disruptions and alternative routes via push transport notifications. ◊◊ Rail punctuality at a stable level overall. ◊◊ Schedule information from the DB Navigator and DB ◊◊ Increase in punctuality as a result of Bahnhof live apps show the ICE car sequence in real PlanStart in the framework of the Railway time on the day of travel. of the Future project. ◊◊ has opened a virtual training simu- lator. Employees are learning to prevent accidents H 1 H 1 around the station based on different scenarios. ¿ Punctuality [%] 2017 2016 2016 [ ] ◊◊ DRIVE4SCHENKER PAGE 37 successfully launched in Euro- Rail in Germany 1) 94.2 93.9 94.2 pean land transport. DB Group (rail) in Germany 94.5 94.3 94.6 DB rail passenger 94.6 94.4 94.8 ◊◊ box2rail is a new online booking platform for container DB Long-Distance 81.0 78.9 78.4 transport customized to meet the needs of small and 1) Non-Group and DB Group train operating companies. medium-sized enterprises.

The punctuality of non-Group and intra-Group TOCs in Ger- ≈≈ Customer/transport information many in the first half of 2017 was at the level of the first half ◊◊ With the Pricing and International Offering Project of 2016, and somewhat above the level of the full-year tickets are bookable more simply and flexibly for many 2016. On the other hand, the punctuality of the TOCs of DB lines in Europe. The plan is for all European railways to Group fell slightly, driven in particular by the development be integrated into the system in the second half-year of of S-Bahn (metro) services and freight transport, although 2017. it was still above the figure for the full-year 2016. Punctu- ◊◊ Customers can reach customer service more quickly and ality in DB rail passenger transport in Germany also fell easily with the new call portal. slightly. PUNCTUALITY IN LONG-DISTANCE TRANSPORT [PAGE 27] ◊◊ The “Wohin Du Willst” (where you want to go) app is increased noticeably due to the consistent continuation available with new features throughout Germany and in and further development of RAILWAY OF THE FUTURE 26 administrative districts. Travelers, particularly those program. in rural areas, receive updates on current disruptions and changes to the local public transport network ser- ≈≈Improvement in customer vices via push notifications and can also book individual satisfaction and quality on-demand services at the push of a button.

◊◊ Numerous measures implemented and initiated. ≈≈ Customer satisfaction ◊◊ The quality and range of our services ◊◊ Free WIFI [PAGE 27] with improved quality for customers have continued to improve for our customers. in 1st and 2nd class was implemented on ICE trains at the beginning of the year. ≈≈ Digitalization and innovation ◊◊ Child care offered on ICE trains awarded German pas- ◊◊ DB Digital Ventures is investing in Connected Signals senger prize from PRO BAHN. Inc, which is specialized in traffic signal network control ◊◊ New products such as a BahnCard that can be cancelled systems. It offers opportunities for developing smart monthly (“BahnCard Flex” campaign), the Summer cities and autonomous driving. Ticket for young travelers, and an additional range of ◊◊ Faster access to travel connection information via “Mein discount fares. Improved pricing displays on bahn.de Bahnhof” (My Station) and “Meine Strecke” (My Line) also show price savings at a glance. using Amazon Echo.

12 Profitable quality leader

◊◊ Regional transport customers have been able to provide ≈≈ Use of 3D printing to produce spare parts for points real-time feedback on selected lines since April. Custo­ liable to failure. Minimization of faults in advance ­mer satisfaction with regional train services is regularly and increased availability of trains. queried with system Railmate, which is already well- established for ICE services. ≈≈ Interlinked mobility ◊◊ DB Mitfahrer (ride sharing) app extended to a further ≈≈ Product quality five Federal states. ◊◊ The ICE PORTAL [PAGE 27] has been offering entertain­- ◊◊ In cooperation with Lidl, we have been offering a free- ment and information services extended by films and floating system integrated into the Call-a-Bike system series since the end of March. that provides 3,500 rental bicycles throughout Berlin ◊◊ DB Regional is testing free WiFi in some regions togeth- since March. er with the public transport authorities. The aim is to have WiFi installed on most of the fleet by 2020 in close ≈≈ Safety co­­operation with the public transport authorities. ◊◊ About 7,000 cameras will be in operation at about 1,000 ◊◊ Since early 2017, it has been possible to reserve seats stations by the end of 2017. There are about 28,000 cam- on selected regional transport lines for single journeys eras installed on trains in the regional and metro trans- when purchasing network tickets and tickets from vend­ port network. Together with the Federal Government ­ing machines. Continuous service expansion planned of Germany, we are investing € 85 million on upgrading for further lines and sales channels. and expanding video technology facilities. The program ◊◊ The DB Lounge concept has been revised. The pilot received a further € 10 million in 2017. project is being presented in Nuremberg in July 2017. ◊◊ Increased use of patrol dogs in the future. There should ◊◊ A new platform waiting room at Wolfsburg central sta- be at least 30 patrol dog handlers on duty at major sta- tion. Armrests on bench seats with USB ports. Digital tions by 2019; currently they are ten. dis­­­play panels for traveler information are being piloted. ◊◊ Bodycams tested for 8,800 operating hours are aimed ◊◊ Pilot project for reporting dirt in Berlin, Hanover and at protecting employees from attacks in Berlin and Hamburg via WhatsApp message. This will be expanded Cologne. Positive test results have reinforced our com- to over 80 major stations across Germany following test mitment to fit security personnel with bodycams at phase. focal points.

≈≈ Punctuality ≈≈Positive economic position ◊◊ Expansion of PLANSTART [2016 INTEGRATED REPORT, PAGE 14 F. AND 101] to further stations. ≈≈ Improved profit situation ◊◊ Punctuality teams are aiming at improving punctuality ◊◊ Revenue development clearly positive. in regional transport. More than 500 individual mea- ◊◊ Operating profit with strong growth. sures have been developed so far, and a larger number ◊◊ Net financial debt increased. of these have already been implemented. ◊◊ Key value management figures improved. ◊◊ A management center has been set up to optimize con- struction planning and minimize the impact on current No major restrictions in comparability to H 1 2016 operations. Trends in expenses and income in the first half of 2017 ◊◊ Expansion of preventive maintenance of switches were not materially affected by CHANGES IN THE SCOPE OF through roll-out of DIGITAL REMOTE DIAGNOSTICS SYSTEM CONSOLIDATION [PAGE 58 F.]. (DIAGNOSTICS PLATFORM DIANA) [PAGE 40]. ◊◊ Increased punctuality by exploiting the opportunities Significant increase in revenues of digitalization: Revenue development was very positive in the first half ≈≈ Optimized predictive maintenance through WAYSIDE of 2017, and was even better on a comparable basis. The MONITORING [PAGE 40]. positive operating development was supported in par­­­ti­c­­- ≈≈ TechLOK records, processes and displays the sen- ular by DB Schenker, DB Arriva, DB Long-Distance and sor data from the DB Cargo traction unit fleet and DB Netze Track. Negative exchange rate effects primarily provides indications of potential failures before from the DEVELOPMENT OF THE BRITISH POUND [PAGE 6] had these occur. a debilitating effect.

13 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

◊◊ The special items in the first half of 2017 resulted from revenue discounts for previous years. H 1 Change Æ External revenues ◊◊ Effects from changes in the scope of consolidation re­­late by regions [€ million] 2017 2016 absolute %

to DB Schenker (€ 13 million) and DB Arriva (€ 16 million). Germany 11,850 11,484 +366 +3.2 ◊◊ Effects of EXCHANGE RATE CHANGES [PAGE 6] were attribut- Europe (excluding Germany) 6,669 6,360 +309 + 4.9 able to DB Arriva (€ –175 million), DB Schenker (€ +10 mil- Asia/Pacific 1,404 1,230 +174 +14.1 North America 878 734 +144 +19.6 DB lion) and Cargo (€ –14 million). Rest of world 269 225 + 44 +19.6 ◊◊ The REVENUE DEVELOPMENT OF THE BUSINESS UNITS [PAGE DB Group adjusted 21,070 20,033 +1,037 +5.2 25 FF.] was overwhelmingly positive in the first half of 2017. ◊◊ Revenues increased even more strongly on a compa- The increase in revenues in the regions was driven primarily rable basis (adjusted for special items, exchange rate by the positive development in business and volumes. changes and changes in the scope of consolidation). ◊◊ In Germany revenues increased, due particularly to growth in the infrastructure business units and at DB H 1 Change Long-Distance. ◊◊ Revenue development in Europe (excluding Germany) Æ Revenues adjusted [€ million] 2017 2016 absolute %

was positive and was driven by new services at DB DB Group 21,066 20,033 +1,033 +5.2 Special items 4 – +4 – Arriva and the business development at DB Schenker. DB Group adjusted 21,070 20,033 +1,037 +5.2 Negative exchange rate effects from the development Effects from changes in the of the British pound had a dampening effect. scope of consolidation –29 –12 –17 +142 Effects from changes in ◊◊ Revenues increased in the Asia/Pacific region as a result exchange rates 179 – +179 – of the business development at DB Schenker. Positive DB Group – comparable 21,220 20,021 +1,199 + 6.0 exchange rate effects provided some support. ◊◊ Development in North America was influenced bystrong

H 1 Change operating development at DB Schenker along with pos- Æ External revenues itive exchange rate effects. by business units [€ million] 2017 2016 absolute %

DB Long-Distance 2,028 1,932 +96 +5.0 Æ H H DB Regional 4,254 4,223 +31 + 0.7 External revenues by regions [%] 1 2017 ( 1 2016) DB Arriva 2,659 2,526 +133 +5.3 DB Cargo 2,150 2,154 –4 –0.2 Europe (excluding DB Schenker 8,072 7,400 + 672 +9.1 Germany Germany) DB Netze Track 746 694 +52 +7.5 56 (57) 32 (32) DB Netze Stations 273 267 + 6 +2.2 Asia/Pacific DB Netze Energy 654 591 + 63 +10.7 7 (6) Other 234 246 –12 –4.9 Rest of world North America DB Group adjusted 21,070 20,033 +1,037 +5.2 1 (1) 4 (4)

Revenue structure virtually unchanged Development of profits remains positive Æ Revenue structure [%] H 1 2017 (H 1 2016) Transition to adjusted profit calculation The transition to the adjusted profit statement is a two-step DB Arriva 13 (13) process. The procedure for RECLASSIFICATIONS AND ADJUST- MENTS [2016 INTEGRATED REPORT, PAGE 106] remains unchanged. Railway DB Schenker in Germany 38 (37) The following presentation of profit development describes 44 (49) the correspondingly adjusted changes in the key items of Other/ the statement of income for the first half of 2017 versus the consolidation 5 (1) first half of 2016. The effects from the changes in the scope of consolidation and exchange rate effects are presented in the following table and are not explained further in the following section. In the first half of 2017, changes in the scope of consolida- tion resulted in higher income and expenses, while exchange rate effects reduced income and expenses overall.

14 Profitable quality leader

H 1 Change

Reclassification

Com- thereof pound Adjust- due to thereof inter- Net ment changes due to est/dis- invest- PPA for in scope exchange Æ Excerpt from adjusted statement counted ment amorti- special 2017 2016 of consol- rate of income [€ million] 2017 interest income zation items adjusted adjusted absolute idation effects %

Revenues 21,066 – – – 4 21,070 20,033 + 1,037 +17 –179 + 5.2 Inventory changes and internally produced and capitalized assets 1,376 – – – – 1,376 1,254 +122 +1 –1 + 9.7 Other operating income 1,239 – – – –7 1,232 1,107 + 125 0 –9 +11.3 Cost of materials –10,411 – – – 15 –10,396 –9,560 –836 –13 + 65 +8.7 Personnel expenses –8,227 – – – 79 –8,148 –7,788 –360 –3 +76 + 4.6 Other operating expenses –2,562 – – – 2 –2,560 –2,631 +71 –2 +36 –2.7 EBITDA adjusted 2,481 – – – 93 2,574 2,415 +159 0 –12 + 6.6 Depreciation and impairments –1,405 – – 38 –28 –1,395 –1,408 + 13 –1 +7 –0.9 EBIT adjusted 1,076 – – 38 65 1,179 1,007 +172 –1 –5 + 17.1 Net operating interest balance –343 9 – – 2 –332 –373 +41 0 +2 –11.0 Operating income after interest 733 9 – 38 67 847 634 +213 –1 –3 +33.6 Net investment income 14 – 0 – – 14 17 –3 – 0 –17.6 Other financial result –14 –9 0 – – –23 –33 +10 0 –1 –30.3 PPA amortization customer contracts – – – –38 – –38 –49 +11 – +1 –22.4 Extraordinary result – – – – –67 –67 –6 –61 – 0 – Profit before taxes on income 733 – – – – 733 563 +170 –1 –3 +30.2

Development of operating profit figures FIGURES OF THE BUSINESS UNITS [PAGE 25 FF.] was varied. The DB clearly positive Long-Distance business unit saw very positive development. The REVENUE DEVELOPMENT [PAGE 13 F.] was clearly positive in The operating profits generated by DB Cargo improved, the first half of 2017. but were still negative. The Other division also recorded an ◊◊ Other operating income grew significantly, as a result increase. The development of the infrastructure business inter alia of the new services and acquisitions at DB units and of DB Regional had a dampening effect. Arriva, repayment of the taxes on fuel elements and higher damage compensation payments at DB Cargo. H 1 Change Æ EBIT adjusted by ◊◊ Cost of materials increased significantly. This was - business units [€ million] 2017 2016 absolute %

tially a result of a higher volume of purchased services DB Long-Distance 216 54 +162 – at DB Schenker in the wake of increased demand and DB Regional 314 334 –20 –6.0 increased freight rates. DB Arriva 110 106 + 4 +3.8 DB Cargo –28 –53 +25 –47.2 ◊◊ Personnel expenses also increased significantly. Aside DB Schenker 208 200 +8 + 4.0 from collective wage increases, the greater number of DB Netze Track 389 398 –9 –2.3 employees also had an impact, particularly at DB DB Netze Stations 150 159 –9 –5.7 Schenker, and as a result of the start of operations and DB Netze Energy 44 63 –19 –30.2 Other/consolidation –224 –254 +30 –11.8 acquisitions at DB Arriva. DB Group 1,179 1,007 +172 +17.1 ◊◊ Other operating expenses fell, in particular as a result of the lower franchise payments following a system The development of operating profit after interest was migration in the UK Trains line of business at DB Arriva. also significantly positive. Net operating interest balance ◊◊ Depreciation was virtually unchanged. The develop- improved, mainly as a result of current low interest rates ment was influenced inter alia by the fact that some for refinancing. vehicles in the previous year reached the end of their The decline in net investment income was essentially useful life for accounting purposes while the delivery of driven by London Overground. new vehicles was delayed in some cases. The addition The development of the other financial result was pri- of new vehicles had the opposite effect. marily attributable to the compounding of provisions. The Overall income climbed more significantly than expenses. decrease was offset by the effects of hedging transactions. Both adjusted EBITDA and adjusted EBIT improved con­ Since the decrease in the extraordinary result exceeded siderably as a result. The development of adjusted PROFIT this development, profit before taxes saw weaker increases.

15 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Extraordinary charges increased slightly ≈≈ Stable financial situation ◊◊ Financial management unchanged. H 1 ◊◊ Ratings stable.

thereof thereof ◊◊ Three bonds issued. affect- affecting Æ Extraordinary result [€ million] 2017 ing EBIT 2016 EBIT

In addition to aiming for a sustained rise in enterprise value, DB Long-Distance – – – – DB Regional 28 28 – – DB Group’s financial management focuses on maintaining DB Arriva 0 0 –3 –3 a capital structure that will ensure excellent credit ratings. DB Cargo –1 –1 0 0 Please see VALUE MANAGEMENT [PAGE 17 F.] for detailed infor- DB Schenker –1 –1 – – mation on the key figures used: redemption coverage, DB Netze Track –3 –3 –3 –3 DB Netze Stations –3 –3 –1 –1 gearing and net financial debt/EBITDA. DB Netze Energy –15 –15 – – There were no changes to DB Groupʼs FINANCIAL MAN- 1) Other/consolidation –72 –72 1 2 AGEMENT SYSTEM [2016 INTEGRATED REPORT, PAGE 110] in the first DB Group – 67 – 67 – 6 –5 half of 2017. The process that was launched to relocate the registered office of Deutsche Bahn FinanceB .V. (DB The extraordinary result saw weaker development in the Finance), Amsterdam/the Netherlands to Germany should first half of 2017 and is comprised of the following special be completed in the second half of 2017. items: DB Group has a long-term European debt issuance pro- ◊◊ Effects from appreciation of vehicles atDB Regional gram available in the amount of € 25 billion. A total of ◊◊ Effects associated with the financing of Germany’s THREE BONDS WERE ISSUED VIA DB FINANCE IN THE FIRST HALF nuclear phase-out at DB Netze Energy OF 2017 [PAGE 17], with the funds from the GBP bond most ◊◊ Expenses from the formation of provisions for em­­ recently issued only received in July 2017. One bond for ployee contractual obligations in the Other division € 500 million was redeemed. Absolute utilization of the The extraordinary result in the first half of 2016 is comprised European debt issuance program increased slightly by of the following special items: € 0.1 billion as of June 30, 2017 compared with the end of ◊◊ Expenses for provisions for civil proceedings related the previous year. The degree of utilization as of June 30, to infrastructure fees at DB Netze Track and DB Netze 2017 is 79% (as of December 31, 2016: 78%). Stations We also launched an Australian debt issuance program ◊◊ Expenses relating to the reversal of hedging transactions (Kangaroo Program) for AUD 5 billion in the first half of 2017 at DB Arriva in order to be able to respond to investor demand in the Asia/Pacific region. This program has not yet been utilized. Profit after taxes improved significantly A multi-currency multi-issuer commercial paper pro- gram with a volume of € 2 billion remains available in the H 1 Change area of short-term debt financing, which like the end of the Æ Excerpt from statement previous year had not been utilized as of June 30, 2017. of income [€ million] 2017 2016 absolute %

As of June 30, 2017, we also had guaranteed unutilized Profit before taxes on income 733 563 +170 +30.2 Taxes on income 46 40 + 6 + 5.0 credit facilities of € 2.0 billion (as of December 31, 2016: Actual income taxes –82 –88 + 6 –6.8 € 2.0 billion), with a remaining term of between 1.0 and 2.0 Deferred tax expenses 128 128 – – years as well as further guaranteed unutilized credit facili- Net profit (after taxes) 779 603 +176 +29.2 ties of € 0.1 billion (as of December 31, 2016: € 0.1 billion). DB AG shareholders 766 591 +175 +29.6 Minority interests 13 12 +1 +8.3 In addition, credit facilities of € 2.2 billion for the oper- ating business were available as of June 30, 2017 (as of The significant improvement in profits before taxes was December 31, 2016: € 2.2 billion). These credit facilities, also evident in the profit after taxes. The impact of the rise which are made available to our subsidiaries around the in the positive income tax position based on a low level was world, include provisions for financing working capital as not material here. well as sureties for payment.

The net profit attributable to the shareholders of DB AG No major finance lease transactions were concluded in along with minority interests saw positive development in the first half of 2017. the first half of 2017.

16 Profitable quality leader

Ratings stable ≈≈ Key value management figures improved ◊◊ Development of operating profits promotes Current ratings ROCE and redemption coverage. Last First con- Short- Long- ◊◊ Equity and EBITDA drive improvements in gearing Ratings DB AG issued firmed term term Outlook and/or net financial debt/EBITDA. May 16, Jul 15, S & P Global Ratings 2000 2016 A–1+ AA– stable May 16, Sep 28, ROCE increased Moody’s 2000 2015 P–1 Aa1 stable

The creditworthiness of DB Group is constantly monitored H 1 Change and assessed by the rating agencies S&P Global Ratings Æ ROCE [€ million] 2017 2016 absolute %

(S&P) and Moody’s. Both agencies published updated 1) EBIT adjusted 1,179 1,007 +172 +17.1 assessments on DB AG in the first half-year of 2017 and left Capital employed as of Jun 30 34,581 33,462 +1,119 +3.3 the ratings and outlook unchanged. ROCE (%) 6.8 6.0 – – Please see our investor relations Web site for additional Target value (%) ≥ 9.0 ≥ 9.0 – –

1) information on the subject of RATINGS Π[WWW.DB.DE/RATING-E] Figures extrapolated to the full year for calculation purposes. and the complete analysis of DB AG by the rating agencies. The ROCE improved in the first half of 2017. This was the Three bonds issued result of a significant improvement in adjusted EBIT in con- junction with a proportionately smaller increase in capital Cur- Volume Coupon Matu- Term employed. The increase in capital employed was predomi- ISIN Issuer rency (million) (%) rity (years) DB February nantly attributable to an increase in receivables and other XS1566135098 Finance NOK 700 2.490 2032 15 assets. DB Decem- XS1626600040 Finance EUR 500 1.500 ber 2032 15.5 DB July Key debt ratios improved 1) XS1640854144 Finance GBP 300 1.375 2025 8 Redemption coverage improved 1) Funds received on July 2017.

In the first half-year of 2017, we issued three bonds with a H 1 Change total volume of € 0.9 billion through DB Finance. The cash Æ Redemption coverage 1) [€ million] 2017 2016 absolute % inflow from theGBP bond most recently issued was only 2) EBITDA adjusted 2,574 2,415 +159 + 6.6 received in July 2017. The funds were raised to refinance Net operating interest 2) –332 –373 + 41 –11.0 due liabilities, and for capital expenditures. Depreciable portion of lease rates 2) 522 497 +25 +5.0 2) ◊◊ A NOK 700 million (€ 79 million) private placement Original tax expenses –82 –88 + 6 –6.8 Operating cash flow after taxes 2,682 2,450 +232 + 9.5 among institutional investors in Norway. The proceeds Net financial debt as of Jun 30 19,030 18,159 +871 + 4.8 were swapped into . Present value operate leases ◊◊ A public bond for € 500 million that represents our as of Jun 30 4,798 4,874 –76 –1.6 Adjusted net financial debt longest bond issued in euros so far at 15.5 years. The as of Jun 30 23,828 23,033 +795 +3.5 demand arose predominantly from Germany, France Pension obligations as of Jun 30 3,947 4,895 –948 –19.4 and Great Britain. Adjusted net debt as of Jun 30 27,775 27,928 –153 –0.5 Redemption coverage (%) 19.3 17.5 – – ◊◊ A further public bond for GBP 300 million (€ 341 mil- Target value (%) ≥ 25.0 ≥ 25.0 – – lion). The proceeds were swapped into euros. The 1) Change in method as of year end 2016 [2016 INTEGRATED REPORT, PAGE 84 F.] demand arose in particular from Great Britain. retroactively adjusted. 2) Figures extrapolated to the full year for calculation purposes.

The redemption coverage improved as of June 30, 2017 driven by a significant increase in the operating cash flow after taxes. The slight decrease in adjusted net debt also provided some support. The fall in PENSION OBLIGATIONS [PAGE 20] as a result of interest rates made itself felt here.

17 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Gearing slightly improved ◊◊ The cash outflow from financing activities fell driven by the lower dividend payments (€ –250 million). A higher Change cash inflow from the BOND ISSUES [PAGE 17] (€ +82 mil- lion) along with lower cash outflows for repayments of Æ Gearing as of Jun 30 [€ million] 2017 2016 absolute %

finance leasing obligations €( –34 million) provided Net financial debt 19,030 18,159 +871 +4.8 Equity 13,446 12,060 +1,386 +11.5 some support here. Gearing (%) 142 151 – –  By contrast, the cash inflow in particular fell from Target value (%) 100 100 – – raising loans (€ –143 million). ◊◊ As of June 30, 2017, DB Group held significantly fewer Gearing improved slightly as of June 30, 2017, but remains cash and cash equivalents compared with the end of above the target value of 100%. The significant increase in the previous year as scheduled. EQUITY [PAGE 20] was the driver for this. ≈≈ Asset situation stable Net financial debt/EBITDA improved ◊◊ Net financial debt increased. ◊◊ Capital expenditures increased significantly. H 1 Change ◊◊ Improvement in the equity ratio. Æ Net financial debt/EBITDA [€ million] 2017 2016 absolute %

Net financial debt as of Jun 30 19,030 18,159 +871 +4.8 Net financial debt increased EBITDA adjusted 1) 2,574 2,415 +159 + 6.6 Net financial debt/EBITDA (multiple) 3.7 3.8 – – Change Target value (%) ≤ 2.5 ≤ 2.5 – – Jun 30, Dec 31, Æ Net financial debt [€ million] 2017 2016 absolute % 1)

Figures extrapolated to calculate the key figure for the full year Interest-free loans 992 1,172 –180 –15.4 Finance lease liabilities 520 533 –13 –2.4 The key figure net financial debt/EBITDA improved slightly Other financial debt 20,715 20,776 –62 –0.3 in the first half of 2017. The increase in net financial debt thereof bonds 19,674 19,740 –66 –0.3 Financial debt 22,227 22,481 –254 –1.1 was overcompensated by improved adjusted EBITDA. Cash and cash equivalents and receivables from financing –3,045 –4,584 +1,539 –33.6 ≈≈ Cash and cash equivalents Effects from currency hedges –152 –273 +121 –44.3 significantly lower Net financial debt 19,030 17,624 +1,406 +8.0

H 1 Change ◊◊ Within financial debt, interest-free loans and finance Æ Summary statement lease liabilities declined due to continuous repayments. of cash flows [€ million] 2017 2016 absolute %

◊◊ Other financial debt was significantly shaped by the Cash flow from business operations 762 1,523 –761 –50.0 Cash flow from investing activities –1,496 –1,310 –186 +14.2 development of the bond portfolio. Over the year so far, Cash flow from financing activities –773 –999 +226 –22.6 new BONDS [PAGE 17] were issued with cash inflows in the Net change in cash and cash equivalents –1,544 –832 –712 +85.6 first half of 2017 of € 0.6 billion, and one bond was Cash and cash equivalents as of Jun 30/Dec 31 2,906 4,450 –1,544 –34.7 redeemed with a countervalue of € 0.5 billion. In addi- tion, the bond portfolio decreased as of June 30, 2016 due ◊◊ Negative working capital effects played a crucial role in to exchange rate effects (€ – 0.2 billion). The develop- the significant decline in cash flow from ordinary busi- ment of the BRITISH POUND [PAGE 6] and the Swiss franc ness operations. The payment arising as a result of the in particular resulted in lower debt. DISPOSAL FUND ACT [PAGE 45] was one of the factors that ◊◊ Since our foreign currency-denominated bonds are, with had an impact here. The positive development of profit very few exceptions, hedged against currency fluctua- before taxes, depreciation and interest (€ + 64 million) tions by corresponding derivatives, exchange rate effects compensated for this slightly. are offset by the corresponding opposite position of the ◊◊ Cash outflow from investing activities increased. This hedge. The effects from currency hedges relating to the was essentially the result of higher payments for net hedged exchange rate at the time of issuance declined capital expenditures (€ +150 million). Payments for as compared with December 31, 2016. the repayment of investment grants also increased (€ +29 million).

18 Profitable quality leader

◊◊ Financial debt fell somewhat as a result of redemption Gross capital expenditures also increased at the same time of interest-free loans and a slight fall in the bond port- driven by DB Arriva, inter alia as a result of vehicle acquisi- folio as a result of exchange rate effects. tions for bus services in London. ◊◊ Cash and cash equivalents were reduced significantly. This caused net financial debt to climb. Capital expenditures priorities remain unchanged The composition of the financial debt is virtually unchanged as of June 30, 2017. H 1 Change Æ Gross capital expenditures by regions [€ million] 2017 2016 absolute %

Æ Composition of financial debt [%] As of Jun 30, 2017 (as of Dec 31, 2016) Germany 3,832 3,229 + 603 +18.7 Europe (excluding Germany) 247 197 +50 +25.4 Interest-free loans: Asia/Pacific 11 7 + 4 +57.1 4 (5) North America 4 4 – – EUROFIMA Bonds Rest of world 2 2 – – loans: 1 (1) 89 (88) Consolidation 12 33 –21 –63.6 Bank borrowings/ Other: 4 (4) DB Group 4,108 3,472 + 636 +18.3

Finance lease liabilities: 2 (2) H 1 Change Æ Net capital expenditures by regions [€ million] 2017 2016 absolute %

Germany 1,214 1,104 +110 +10.0 Capital expenditures increased Europe (excluding Germany) 247 196 +51 +26.0 Asia/Pacific 11 7 + 4 +57.1 North America 4 4 – – H 1 Change Rest of world 2 2 – – Consolidation 12 33 –21 –63.6 Æ Capital expenditures [€ million] 2017 2016 absolute %

DB Group 1,490 1,346 +144 +10.7 Gross capital expenditures 4,108 3,472 + 636 +18.3 Investment grants 2,618 2,126 +492 +23.1 Net capital expenditures 1,490 1,346 +144 +10.7 Broken down by regions, the vast majority of gross capi- tal expenditures was again made in Germany, where the The increase in gross capital expenditures was mainly due in­­crease was mainly due to higher infrastructure capital to noticeably higher expenditures for track infrastructure. ex­­­­­­penditures at DB Netze Track (€ + 412 million) and DB Investment grants also increased significantly. Investment Netze Stations (€ +71 million). Vehicle acquisitions at DB grants amounted to about 64% of gross capital expendi- Long-Distance and DB Cargo inter alia increased capital tures in the first half of 2017 (first half of 2016: about %61 ). expenditures. Net capital expenditures increased primarily as a result Capital expenditures in the Europe region (excluding of higher vehicle capital expenditures. Germany) rose as a result of vehicle acquisitions, particu- larly by DB Arriva for new bus services in London. This was Æ Gross capital expenditure structure [%] H 1 2017 (H 1 2016) offset by the completion of vehicle acquisition projects in the previous year at DB Cargo, primarily in Great Britain, DB Arriva France and . 4 (4) Railway in Germany DB Schenker 90 (88) 2 (2) Investment grants increased Other/ Investment grants received in the first half-year of 2017 consolidation

4 (6) increased by € 492 million or 23.1% to € 2,618 million. As in the first half-year of 2016, the recipients were almost exclusively our infrastructure companies. Please see our Capital expenditure activities are focused mainly on the Web site for DETAILS ON THE VARIOUS GRANT FORMS Œ business units of the railway in Germany, particularly on [WWW.DB.DE/CAPEX]. measures designed to improve high performance and effi- ciency in track infrastructure and vehicles. The structure of gross capital expenditures is virtually unchanged. Capital expenditures increased in the first half of 2017 as a result of capital expenditures in the infrastructure and in vehicles.

19 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Balance sheet total slightly down In structural terms, there was a slight shift to the benefit of non-current assets on the assets side. Change Equity increased considerably on the equity and liabili- Jun 30, Dec 31, ties side of the balance sheet. The positive result of the first Æ Balance sheet [€ million] 2017 2016 absolute %

half of 2017 (€ +779 million), along with the interest-driven Balance sheet total 56,102 56,623 –521 –0.9 ASSETS increase of changes relating to the revaluation of pensions Non-current assets 45,653 45,589 + 64 + 0.1 (€ +653 million) recognized in the reserves, played a crucial Current assets 10,449 11,034 –585 –5.3 role in this. This was countered by the dividend payment to EQUITY AND LIABILITIES the Federal Government (€ – 600 million), the changes Equity 13,446 12,744 +702 +5.5 Non-current liabilities 26,340 28,709 –2,369 –8.3 associated with currency volatility (€ –93 million) recorded Current liabilities 16,316 15,170 +1,146 +7.6 in the reserves and the changes associated with hedging transaction volatility (€ –23 million) recorded in the re- serves, particularly for the purposes of hedging energy Æ Balance sheet structure [%] As of Jun 30, 2017 (as of Dec 31, 2016) prices. Higher equity resulted in improvements to the equity ASSETS EQUITY AND ratio with a slight decline in the balance sheet total. Non-current LIABILITIES assets Equity ◊◊ Non-current liabilities decreased. This development was 81.4 (80.5) 24.0 (22.5) essentially characterized by a fall in NON–CURRENT FINAN- Current [ ] liabilities CIAL DEBT PAGE 18 F. (€ –1,644 million) as a result of re­ 29.1 (26.8) Current classification into current financial debt. Pension obliga- assets Non-current tions (€ –563 million) also fell as a result of revaluations, 18.6 (19.5) liabilities 46.9 (50.7) particularly in Germany. The fall in non-current other provisions (€ –95 million) supported this development. ◊◊ Current liabilities rose essentially as a result of higher The consolidated financial statements are prepared in accor- current financial debt €( +1,390 million), primarily as dance with the International Financial Reporting Standards a result of the reclassification of bonds becoming due (IFRS). There were no material changes to IFRS regulations in the short term. Trade liabilities (€ +104 million) rose for DB Group’s consolidation and accounting principles that essentially as a result of effects as of the reporting date. would result in any changes to the consolidated financial This was partly offset by a decrease in current other statements. provisions (€ –300 million), mainly following the asser- ◊◊ The balance sheet total declined slightly. tion of short-term decommissioning provisions. ◊◊ Non-current assets remained virtually unchanged. The In structural terms of equity and liabilities, the ratio of receivables relating to deferred tax assets (€ +136 mil- current liabilities to the balance sheet total has increased. lion) that increased in the wake of revised profit expecta­ ­tions of DB Group as well as higher property, plant and equipment (€ + 57 million) as a result of increased net capital expenditures were offset by a fall in intangible assets (€ –115 million) in particular at DB Arriva and DB Schenker. Derivative financial instruments €( –84 mil- lion) also fell essentially as a result of exchange rate effects on hedging transactions for bonds. ◊◊ The fall in current assets was essentially driven by the fall in cash and cash equivalents (€ –1,544 million). The in­­­­crease in current other receivables and assets (€ +479 mil­­­­­­­­­­­lion) as well as trade receivables (€ +392 mil­­­lion) off­ set this primarily as a result of reporting date effects.

20 PROFITABLE QUALITY LEADER / Top employer

Top employer

Number of employees New career system More than 300 participants increased overall introduced for executives attend Railway of the Future campaign workshops

Full-time employees (FTE) Natural persons (NP)

Change Change † Employees Jun 30, Dec 31, Jun 30, Jun 30, Dec 31, Jun 30, by business units 2017 2016 absolute % 2016 2017 2016 absolute % 2016

DB Long-Distance 16,301 16,326 –25 –0.2 16,443 17,388 17,400 –12 –0.1 17,538 DB Regional 35,631 36,008 –377 –1.0 35,957 37,480 37,853 –373 –1.0 37,672 DB Arriva 54,145 54,150 –5 – 51,618 56,617 56,564 +53 + 0.1 53,986 DB Cargo 28,964 29,671 –707 –2.4 30,155 29,411 30,084 –673 –2.2 30,525 DB Schenker 69,370 68,388 +982 +1.4 66,822 71,761 70,805 +956 +1.4 69,151 DB Netze Track 44,717 43,974 +743 +1.7 43,948 45,767 44,957 +810 +1.8 44,876 DB Netze Stations 5,404 5,093 +311 + 6.1 5,007 5,707 5,396 +311 +5.8 5,281 DB Netze Energy 1,742 1,736 + 6 + 0.3 1,756 1,786 1,777 +9 + 0.5 1,800 Other 51,291 51,022 +269 + 0.5 50,986 53,788 53,496 +292 + 0.5 53,411 DB Group 307,565 306,368 +1,197 + 0.4 302,692 319,705 318,332 +1,373 + 0.4 314,240 Effects from changes in the scope of consolidation –509 – –509 – –339 –520 – –520 – –348 DB Group – comparable 307,057 306,368 + 689 + 0.2 302,353 319,185 318,332 +853 + 0.3 313,892

To guarantee better comparability, the number of employees is converted into full-time employees. Figures for part-time employees are measured in accordance with their share of the regular annual working time.

The number of employees within DB Group increased as of In Germany, the increase was primarily due to growth at June 30, 2017 compared with the end of the previous year. DB Netze Track. Aside from Europe, DB Schenker mainly This was primarily due to growth in contract logistics at added employees in Asia/Pacific and North America. In DB Schenker and additional requirements in the area of Europe (excluding Germany), the increase was largely maintenance and construction projects at DB Netze Track. offset by decreases atDB Cargo. As of June 30, 2017, the Adjustments at DB Cargo had the opposite effect. percentage of employees outside of Germany was un­ changed at about 38%. Change † Employees Jun 30, Dec 31, Jun 30, by regions [FTE] 2017 2016 absolute % 2016 ≈≈Further development of strategic

Germany 188,132 187,395 +737 + 0.4 187,476 workforce planning Europe (excluding Germany) 92,703 92,694 +9 – 89,952 Asia/Pacific 15,180 15,016 +164 +1.1 14,371 Further development of strategic workforce planning con­ North America 8,662 8,556 +106 +1.2 8,277 tinued in the first half of 2017. In the future, a new concep­ Rest of world 2,888 2,707 +181 + 6.7 2,616 tual approach including strategic workforce management DB Group 307,565 306,368 +1,197 + 0.4 302,692 will also cover skill-based changes to job descriptions and will be IT-supported. Change † Employees Jun 30, Dec 31, Jun 30, by regions [NP] 2017 2016 absolute % 2016 ≈≈Talent acquisition with new

Germany 196,527 195,692 +835 + 0.4 195,537 employer branding campaign Europe (excluding Germany) 96,218 96,119 +99 + 0.1 93,260 Asia/Pacific 15,250 15,084 +166 +1.1 14,435 At the end of April 2017, we unveiled our new employer North America 8,822 8,730 +92 +1.1 8,392 branding campaign, “Welcome! You fit to us.” Once again, Rest of world 2,888 2,707 +181 + 6.7 2,616 the main characters are DB employees. DB Group’s Career DB Group 319,705 318,332 +1,373 + 0.4 314,240 Team also have a presence on Snapchat, an important channel for the high school students target group. In May 2017, we received the Employer Branding Award from the European research institute trendence in the category

21 !!!

Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

“Best Employer Branding for High School Students.” We One of the goals of the conference was to encourage women received the international “European Excellence Award within DB Group to network with each other and to increase in HR 2017” in the “Digitalization” category for our use of the visibility of women with potential for leadership roles. virtual reality in recruiting. The first target group results DB Group participated in the 5th German Diversity Day for employer rankings show that we are on a good path to along with companies in the “Diversity in Business” forum. achieve our top employer target for this year. In the stu­ In Berlin, am Main, and Hamburg, diversity movie dents target group, we achieved a ranking of 15 among nights were held entitled “Diversity – Now Let’s Watch engineering students, 28 among IT students and 38 among Together!” students of economics – thereby improving our ranking In May, there was a particular focus on the mentoring among each of these target groups. program “Career with Children.” The program with 17 par­ We have successfully established and expanded recruit­ ticipants that started in 2015 came to an end, while the ­ing events with our recruiting days and candidate castings. third round began for 18 new participants. “Career with At the end of 2017, we will also introduce new recruiting Children” supports employees in the successful career de­ software in Germany which will be used worldwide in every vel­opment before, during and after parental leave, thereby business unit. helping to strengthen the balance between work and family life within DB Group. ≈≈Personnel development continues ≈≈Working conditions optimized The career system for the top management level was intro­ duced in the first half of 2017. It promotes a broad range of The agreement with the Railway and Transport Workers experience for executives and greater movement within the Union (Eisenbahn- und Verkehrsgewerkschaft; EVG) and management team. the German Train Drivers’ Union (Gewerkschaft Deutscher After a successful pilot project, the DB leadership role Lokomotivführer; GDL) to raise scale wages by 2.5% as of model will form the basis for staffing and diagnostic proce­ April 1, 2017 was implemented, along with the agreed dures. Its practical feasibility has been confirmed by the improvements for young professionals, such as increases in specialist division and Executive Support. apprenticeship pay, rental allowance and company pension. Further development and consolidation of the compe­ In addition, an agreement was reached with the unions tence model for employees and executives with collective under which each employee had until June 30, 2017 to bargaining agreements were initiated at the employee choose among three models: a 2.62% pay increase, a reduc­ level. The competence road map developed in cross-busi­ tion in working hours of one hour per week or six additional ness-unit workshops has already been validated by the days of vacation. The model chosen will apply beginning in Group’s Personnel Development Committee. January 2018. A total of 56% of employees chose additional Preparation of the 2017 tablet rollout for trainees in vacation, 41% chose the pay increase and 3% chose the re­ their first year of apprenticeship as railway employees in duction in working hours. The active response rate was 70%. operational service and as businessmen for traffic services, A new collective bargaining agreement, Work 4.0 EVG as well as a practical trial in commercial and technical voca­ 2016, was concluded with the EVG. It mainly covers the tional training, were initiated. satisfaction of individual requirements for a self-deter­ mined place of work, rules governing on-call duty, including ≈≈Strengthening the corporate the introduction of performance-based pay, how to handle culture changes in job descriptions and participation in produc­ tivity gains. Two regional RAILWAY OF THE FUTURE CAMPAIGN WORKSHOPS DB Group’s agreement with GDL will improve personal [PAGE 4] were held during the first half of 2017. More than 300 planning certainty, such as term of notice for days off and participants worked on solutions to implement the Railway shifts, rules intended to standardize the allocation of work­ of the Future on-site. ­ing hours, and an evaluation of pilot projects on scheduling In February 2017, around 180 female executives met at the shifts and time off. In addition, the wage structure for train second International DB Group Female Managers’ Conference drivers was addressed in a new collective bargaining agree­ in accordance with “Women. Leading. Transformation.” ment while the wage structure for train attendants and catering staff was further developed effective April 2018.

22 TOP EMPLOYER / Eco-pioneer

Eco-pioneer

DB Group joins 36,500 freight cars operated DB Regional operates 1,500 international Science-Based by DB Cargo in Germany buses that meet the Euro VI Targets initiative refitted with whisper brakes emissions standard

≈≈Responsibility to protect climate ≈≈ Platooning and autonomous driving In May, DB Schenker signed a COOPERATION AGREEMENT DB Group takes its climate protection responsibility seri­ WITH MAN [PAGE 37] to test electronically linked platoons of ously and sets challenging targets to steadily reduce its trucks separated only by short driving distances. Pla­ greenhouse gas emissions. By 2020, we will reduce specific tooning can reduce fuel consumption by up to 10%, thereby greenhouse gas emissions from our worldwide transport making it possible to achieve a reduction in CO₂ emissions. services by 30% compared to 2006. In the future, DB Regional will use self-driving buses to make a contribution toward consistent environmentally ≈≈ Accession to the Science-Based friendly mobility chains. At the end of 2017, the first pilot Targets initiative run of a self-driving bus on public streets will begin in Bad In March, DB Group became the first mobility company in Birnbach. Moreover, the bus will operate ex­clusively on Germany to join the international Science-Based Targets electric power, thereby emitting less pollution. initiative (SBT) launched by the CDP rating agency, the UN Global Compact, the World Resources Institute and the ≈≈Noise reduction measures World Wide Fund for Nature (WWF). Companies from across the world have come together under this initiative DB Group also intends to play a leading role in noise reduc­ to calculate their climate-protection targets on a scientific tion. In order to noticeably relieve residents near railway basis, focus­­ing on the internationally agreed target of 2°C. tracks, we will halve our rail transport noise by 2020, com­ pared to 2000. Revision of the overall concept for the noise ≈≈ Proof of contribution to climate remediation program to the current, lower limit of 57 protection on business trips dB(A) is on schedule and will likely be completed in the Business clients of DB Group received their annual “bahn. spring of 2018. business environment certificate” during the first half of 2017. The company’s contribution to climate protection ≈≈ Making good progress on through the use of DB Long-Distance transport is shown in refitting freight cars the certificate and is used by clients to calculate their own At the end of June, around 36,500 freight cars (out of DB carbon footprint. All in all, around 4.4 billion long-distance Cargo’s active fleet of around 64,000 freight cars in Germa­­­­- pkm traveled emissions-free were certified for bahn.business ny) were rolling on quiet brake shoes. By the end of 2017, customers in 2016 – an increase of around 300 million pkm the number should grow to around 40,000. Plans call for over the 2015 level. the vehicle fleet to be completely quiet by the end of 2020.

≈≈ Energy-saving measures at DB Regional ≈≈ Financing agreement for noise In 2016, DB Regional rail rolled out measures designed to abatement in the Middle Rhine Valley help drivers adopt energy-saving driving techniques. In Following the signing of separate financing agreements in addition, technical measures to improve energy consump­ March 2017 between the Federal Government, the states of tion by rolling stock were identified in the first half of 2017. Rhineland-Palatinate and Hesse, and DB Group, the way is For example, increasing electrodynamic brake power to now clear formally, as well, to improve noise abatement in increase brake energy recovery, improving air-conditioning the Middle Rhine Valley. Overall, just under € 73 million will control and optimizing shutdown. The measures will be go into additional noise reduction projects on both sides of implemented gradually beginning in mid-2017. the Rhine through 2021 and beyond. Among other things, this will involve the use of rail dampers and noise protec­ tion walls. About 50 noise abatement measures will further reduce rail transport noise in the Middle Rhine Valley. The initial measures will be implemented this year.

23 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

≈≈Recycling rate is at a high level ≈≈Other topics

In order to conserve natural resources, we have set a target ≈≈ Fair-trade-certified coffee and fund- of achieving a 95% recycling rate by 2020, which we have raising campaign on ICE and IC trains already exceeded. In addition, we are using more and more In April, we started serving only fair-trade-certified hot recycled materials and increasing the service life of our beverages on our ICE and IC trains. In addition, the on-­board vehicles, for example by REDESIGNING THE ICE 3 [PAGE 27]. bistro offers a 20 cent discount on any hot beverage if the passenger supplies his or her own reusable travel mug – ≈≈ Saving paper with mobile tickets the environmentally friendly alternative to a paper cup. In the first half of 2017, 6.6 million tickets were booked on As part of the new annual campaign in the on-board mobile devices. On average, that is equal to about 36,000 restaurant, during which food bloggers develop recipes reservations per day, and an increase of 60%. By using every two months for the dishes featured during the cam­ mobile instead of printed tickets, our customers saved paign, the fund-raising campaign will continue to contrib­ 32.3 tons of paper during this time period. ­ute 10 cents from every dish sold to Bergwaldprojekt e. V. The association is committed to protecting and preserving ≈≈Air quality control forested areas in Germany. During the last campaign, which ran from January 2016 to March 2017, a total amount of Keeping emissions of pollutants as low as possible is im­port­ about € 32,600 was donated. ­ant to us, because they can be hazardous to health and can harm people. Therefore, for years, we have been reduc­­ing ≈≈ 21st Environmental Forum held emissions of pollutants through the use of modern vehicles. Every year, DB Environment invites association representa­ tives to take part in an open dialog. The Environmental ≈≈ Use of Euro VI buses Forum (formerly Environment and Transport Workshop) The demands on our buses are high: DB Regional Bus was held in Berlin for the 21st time. In workshops and panel operates 1,500 buses with the most up-to-date emissions discussions, DB Management Board members Ronald standard, Euro VI, representing 17% of its bus fleet. We Pofalla and Berthold Huber, as well as Sylvia Lier, Chair­ therefore have the biggest fleet in Germany that complies woman of DB Connect’s general management team and with this strict emissions standard. To indicate its environ­ Dr. Jürgen Wilder, Chairman of the Management Board of mentally friendly stance, Südwestbus has a green-painted DB Cargo, answered questions from the association repre­ bus dubbed the “Green Frog,” which has been operating as sentatives. The environmental policy spokespersons for an environmental ambassador in the region since May. parliamentary groups in the German Bundestag and repre­ sentatives of the logistics industry also held discussions at ≈≈Nature conservation the Bremen Representation.

Many protected animals and plants have settled on railway ≈≈ Partnership with Essen, the European lines or in unused buildings, as these can serve as ideal Green Capital 2017 habitats. Our goal is to protect them, both in operations As part of our aspiration to be an eco-pioneer, we are the and planning and in the construction and maintenance of official mobility and logistics services provider for “Essen, railway installations. the European Green Capital 2017.” Along with DB Schenker, we are supporting the Green Capital of Europe as premium ≈≈ Commitment to endangered species sponsor. As a result, two “City Trees” have been erected at “Bees on the Rail” is the name of the project in which we Essen’s central station. The two walls, on which special identified potential sites for bee colonies within our real moss cultures have been planted, filter out as much partic­ estate portfolio. Since October 2016, we have made these ulate matter and nitrogen oxide from the air as 550 trees in sites available to private beekeepers. So far, more than 1,600 the city would do. beekeepers have applied. Altogether, 500 sites have already been made available to them. On May 22 the “International Biodiversity Day,” one of the first sites, was presented to the public in Berlin-Schöneberg. In addition, we are com­ mitted to the preservation of sand lizards, smooth snakes, bats, cranes, kestrels, great bustards and wild horses.

24 ECO-PIONEER / Development of business units

Development of business units

Positive development Burdens from factor cost International business is at DB Long-Distance increases in Germany driving revenue development

OVERVIEW OF BUSINESS UNITS

Total revenues External revenues

H 1 Change H 1 Change

Æ Revenues adjusted [€ million] 2017 2016 absolute % 2017 2016 absolute %

DB Long-Distance 2,107 2,006 + 101 + 5.0 2,028 1,932 + 96 + 5.0 DB Regional 4,304 4,280 + 24 + 0.6 4,254 4,223 + 31 + 0.7 DB Arriva 2,662 2,529 + 133 + 5.3 2,659 2,526 + 133 + 5.3 DB Cargo 2,306 2,312 – 6 – 0.3 2,150 2,154 – 4 – 0.2 DB Schenker 8,103 7,431 + 672 +9.0 8,072 7,400 + 672 +9.1 DB Netze Track 2,652 2,601 +51 +2.0 746 694 +52 +7.5 DB Netze Stations 635 623 +12 +1.9 273 267 + 6 +2.2 DB Netze Energy 1,416 1,391 +25 +1.8 654 591 + 63 +10.7 Other 2,154 2,058 +96 +4.7 234 246 – 12 – 4.9 Consolidation – 5,269 – 5,198 – 71 +1.4 – – – – DB Group 21,070 20,033 +1,037 +5.2 21,070 20,033 +1,037 +5.2

EBIT adjusted EBITDA adjusted

H 1 Change H 1 Change

Æ Operating profit figures [€ million] 2017 2016 absolute % 2017 2016 absolute %

DB Long-Distance 216 54 +162 – 328 184 +144 +78.3 DB Regional 314 334 – 20 – 6.0 634 651 – 17 – 2.6 DB Arriva 110 106 +4 +3.8 238 232 + 6 +2.6 DB Cargo – 28 – 53 + 25 – 47.2 82 39 +43 +110 DB Schenker 208 200 +8 +4.0 305 294 +11 +3.7 DB Netze Track 389 398 – 9 – 2.3 815 838 – 23 – 2.7 DB Netze Stations 150 159 – 9 – 5.7 217 227 – 10 – 4.4 DB Netze Energy 44 63 – 19 – 30.2 79 98 – 19 – 19.4 Other/consolidation – 224 – 254 +30 – 11.8 – 124 – 148 +24 – 16.2 DB Group 1,179 1,007 +172 +17.1 2,574 2,415 +159 + 6.6 Margin (%) 5.6 5.0 – – 12.2 12.1 – –

Gross capital expenditures Net capital expenditures

H 1 Change H 1 Change

Æ Capital expenditures [€ million] 2017 2016 absolute % 2017 2016 absolute %

DB Long-Distance 215 156 +59 +37.8 215 156 +59 +37.8 DB Regional 164 137 +27 +19.7 134 135 – 1 – 0.7 DB Arriva 184 127 +57 +44.9 184 127 +57 + 44.9 DB Cargo 110 52 +58 +112 108 50 +58 +116 DB Schenker 76 72 +4 +5.6 76 72 +4 +5.6 DB Netze Track 2,907 2,495 +412 +16.5 525 515 +10 +1.9 DB Netze Stations 253 182 +71 +39.0 80 69 +11 +15.9 DB Netze Energy 48 49 – 1 –2.0 17 20 – 3 – 15.0 Other/consolidation 151 202 – 51 – 25.2 151 202 – 51 – 25.2 DB Group 4,108 3,472 + 636 +18.3 1,490 1,346 +144 +10.7 thereof investment grants 2,618 2,126 +492 +3.1 – – – –

25 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

≈≈Overarching topics ≈≈ Capital expenditure program for the future in the second year ≈≈ Positive development in order book The German Federal Ministry for Transport and Digital Infrastructure (Bundesministerium für Verkehr und digitale Change Infrastruktur; BMVI) has promised additional Federal funds Order book in passenger transport Jun 30, Dec 31, as part of the Federal Government’s capital expendi­­ture [€ billion] 2017 2016 absolute % program for the future amounting up to € 830 million for DB Regional 71.0 68.2 +2.8 +4.1 secured 51.9 49.1 +2.8 +5.7 2016 to 2018. The focus will be on creating a planning unsecured 19.1 19.1 – – re­serve, noise protection on rails, digitalization, and the DB Arriva 23.1 23.9 –0.8 –3.3 expansion of new control systems. The program continued secured 10.6 10.5 + 0.1 +1.0 to be implemented in the first half of 2017. unsecured 12.5 13.4 –0.9 –6.7 Total 94.1 92.1 +2.0 +2.2 secured 62.5 59.5 +3.0 +5.0 ≈≈ Quality of the existing network unsecured 31.6 32.6 –1.0 –3.1 improved further For the proof of infrastructure quality that must be pro- In total, order volume rose in the first half of 2017. Addi- vided annually under the LUFV II, a total of eight key quality tions of about € 8.4 billion from the transport contracts indicators subject to sanctions as well as other assessment awarded were offset by disposals – mainly due to services parameters were established which are used to describe performed – of about € 6.1 billion and changes in assump- and assess in detail the state and development of the ex­ist­ tions of about € 0.4 billion, which were primarily due to ­ing track infrastructure. The development of key quality exchange rate effects. indicators shows the positive effect that the comprehensive modernization program has on the rail network. ≈≈ Development in the Stuttgart – Ulm project ≈≈DB Long-Distance business unit The cost assessment and forecast carried out in 2016 as well as compliance with the funding framework of € 6.526 billion ≈≈ Events in the first half of 2017 also continue to be confirmed. Initial scheduling and eco­ Vehicle availability improved nom­­­ic countermeasures are included, whereas other mea- The availability of the ICE fleet improved compared with sures are still in review. the first half of 2016: Concreting work on the floors and walls in some con- ◊◊ Continuous reduction in rolling stock failures for a struction phases is underway for the new Stuttgart central higher operating quality. station. The concrete casting of the first chalice took place ◊◊ Improvement in resolving operating incidents by in June 2017. On March 28, 2017, the breakthrough in the holding quality discussions. Ober-/Untertürkheim tunnel was celebrated. The imme- ◊◊ Implementation of numerous stabilizing measures, diate enforceability of the decision to approve the plan was such as improving our ability to prepare for and resolve restored in the airport sector, and initial clearance mea- incidents. sures were therefore able to be taken. More than half of the ◊◊ Admission of all 17 new ICE 3 multiple units of the 407 extent of the tunnel required for Stuttgart 21 has already series for traffic to France. been bored and extracted. The program to refit the ICE 3 fleet with new drive wheel Also on the new Wendlingen – Ulm construction line sets will probably continue until 2018. Approval was with over 35 km more than half of the tunnel kilometers granted in October 2016 to put the new wheel sets into have already been bored and extracted. In April 2017, the service on the ICE T fleet. Refitting will probably continue Weströhre stop for the Boßlertunnel followed on the until 2019 and is a prerequisite for the resumption of the Albaufstieg ascent. Two new tunnel boring machines are tilting body system (tilting technology) of the ICE T fleet. currently being assembled for boring the tunnel in the foot- hills (Albvorland), and these will accommodate signage as from October 2017. In May 2017, construction also started on the Merklingen station, which is to be carried out as a separate project outside the new construction line.

26 Development of business units

The operation of the IC 2 fleet is now stable. Two rolling ≈≈ Development in the first half of 2017 stock remedies are being carried out for extra stabilization, ◊◊ Positive effects from the market and the first of which was completed to remedy “teething prob- competitive environment. lems” and carry out constructive improvements at the end ◊◊ Quality improvements – especially improvements of June 2017. By the end of the year, hardware and software in punctuality and use of new vehicles. updates will have been created in a second rolling stock ◊◊ Positive effect due to the introduction remedy, as well as warranty work. of free WiFi in second class.

Vehicle projects in long-distance transport H 1 Change ◊◊ After the end of RESET 2016 [2016 INTEGRATED REPORT, PAGE 20 F.], ¿ † DB Long-distance 2017 2016 absolute %

the RESET 2017 program started seamlessly at the turn Punctuality (rail) (%) 81.0 78.4 – – of the year with the transformation phase to transfer Rate of people making connections in the reset requirement to the control processes. (long-distance/long-distance) (%) 86.2 86.4 – – Passengers rail (million) 68.3 66.7 +1.6 +2.4 ◊◊ The redesign of ICE 3 has continued. Seven vehicles Passengers long-distance bus (million) 0.3 0.4 – 0.1 – 25.0 were overhauled and delivered in the first half of 2017. Volume sold rail (million pkm) 19,452 18,835 + 617 +3.3 Modernization leads to a significant reduction in mate- Volume sold long-distance bus (million pkm) 79.3 102.7 – 23.4 – 22.8 rial and energy consumption compared with new pro- Volume produced (million train-path km) 69.8 71.6 – 1.8 – 2.5 curement (about 80%). Load factor (%) 53.3 50.5 – –

◊◊ In the trial operation of the ICE 4 carried out since late Total revenues (€ million) 2,107 2,006 +101 +5.0 fall of 2016, high-frequency vibration has been estab- External revenues (€ million) 2,028 1,932 +96 +5.0 lished with increasing mileage of both test trains. This EBITDA adjusted (€ million) 328 184 +144 +78.3 EBIT adjusted (€ million) 216 54 +162 – did not constitute any safety impairment. A short-term Gross capital expenditures (€ million) 215 156 +59 +37.8 solution for this loss of comfort had already been found. | Employees as of Jun 30 (FTE) 16,301 16,443 –142 –0.9 We are working on further optimizing the solution already found alongside the manufacturer Siemens. Punctuality in long-distance transport increased noticeably due to the consistent continuation and further develop- Considerably improved Internet ment of the RAILWAY OF THE FUTURE [PAGE 3 F.] program. access via WiFi in the ICE The rate of people successfully making long-distance trans- Since early 2017, first- and second-class passengers in the port connections fell slightly. ICE have been benefiting from significantly improved The number of passengers and volume sold increased. Internet access via WiFi. The integrated system technology Measures to promote services and the introduction of free now uses all German mobile networks and is increasing the WiFi in second class drove development. Market-driven stability and performance of the Internet connection so stimuli were also positive. Among other things, the elimi- significantly that customer satisfaction has risen sharply. nation of the leap year’s additional transport day in the first In addition, new mobile signal amplifiers (repeaters) are half of 2016 as well as the discontinuation of night and car improving reception and providing more stable voice tele- transport train services in the previous year had a moder- phony and fast data transmission via the SIM card of pas- ating effect. sengers’ devices. 80% of a total of about 1,600 ICE cellular The decline in volume produced resulted from the elim- phone areas are currently already fitted with the new ination of services (, car and night trains, as well as repeaters. refugee transport). An increase in construction activ­­ity in the network also had a negative effect. New entertainment offer in theICE portal As the number of passengers increased, the capacity The entertainment and information offer in theICE portal utilization of the trains rose. has been extended by films and series. Since March, Supply adjustments as well as loss of performance on passengers in the ICE at Maxdome Onboard have the choice individual lines led to a decline in the number of passen- between 50 free of charge and partially monthly changing gers and transport performance in bus services. films, series, documentaries and TV shows, and up to 1,000 Revenues were better in terms of prices and perfor- items of chargeable content. mance than in the first half of 2016. Supporting effects resulted, among other things, from a less intensive compet- itive environment compared to the first half of 2016.

27 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

The increase in other operating income (+14.0%) can Twelve contract award procedures were concluded by con- essentially be attributed to the sale of vehicles, to higher tracting organizations for regional rail passenger transport train services for third parties and to the reimbursement of in Germany in the first half of 2017 (first half of 2016: nine). taxes on fuel elements. This was offset by lower compen- A total of about 33 million train kilometers were awarded sation payments. (first half of 2016: 34 million train kilometers). Of the train The reduction in the cost of materials (–2.9%) was kilometers for which new orders were placed in the first mainly driven by a price decrease in the costs of energy half of 2017, about 86% had previously been operated by consumption and commissions and a smaller volume of companies within DB Group. maintenance being required. We won eight of the contract awards (first half of 2016: Personnel expenses increased (+2.8%) as a result of five) accounting for 85% (in the first half of 2016: 45%) of collective bargaining agreement. the train kilometers awarded. The other operating expenses (– 0.4%) decreased slightly, due to lower expenses for advertising among other Volume (million Nkm 1)) things. Æ Concluded transport contracts 1) Depreciation (–13.8%) decreased, partly because some (bus) in 2017 Term p.a. total

ICE ICE HVV RZ 9 – North-west 1 and 3 trains reached the end of their useful lives Regional Transport 12/2017 – 12/2027 1.5 15.1 for accounting purposes. Procurements of ICE 3 and IC 2 VVS Ludwigsburg LB 8 Neckartal 01/2018 – 12/2026 1.5 12.2 trains had the opposite effect. WTV – Waldshut Ost 12/2017 – 12/2027 0.8 8.4 Adjusted EBIT and EBITDA improved in particular due to VRN Ladenburg-Schriesheim 12/2017 – 12/2027 0.8 8.4 KVV LB Southern administrative a significant increase in revenues with a simultaneous district of Rastatt II 12/2017 – 12/2025 0.8 6.1 decrease in expenses. VVS Böblingen LB 8 12/2017 – 12/2023 0.9 5.5 Gross capital expenditures increased as a result of E4 Herford – Bünde/Kirchlengern bundle 12/2018 – 06/2028 0.5 4.6 Tiefenbronn transport area 12/2017 – 12/2025 0.5 4.0 vehicle acquisitions (ICE 3) as well as capital expenditures LK Steinburg – West network in the plants’ infrastructure. Compared to the first half of (Wilstermarsch) 01/2018 – 12/2025 0.5 3.2 2016, lower procurements of IC 2 vehicles dampened this VVS Böblingen “Weil der Stadt” (bundle 4) 12/2017 – 12/2025 0.2 1.5 development. RMV LOF West 2 12/2017 – 12/2021 0.3 1.2 The number of employees as of June 30, 2017 declined Other (five contracts) 1 – 8 years 0.2 0.9 slightly as a result of the adjustment to the night services. Total 1) 8.5 71.1 1) Differences due to rounding are possible. ≈≈DB Regional business unit In bus services, a volume of 48 million commercial vehicle ≈≈ Transport contracts in Germany kilometers (Nkm) were awarded in Germany (first half of 2016: 62 million Nkm) in 78 tender award procedures (first Volume half of 2016: 85 tenders). Of the commercial vehicle kilome- (million train km) Æ Concluded transport contracts ters newly awarded, 36% (first half of 2016: 43%) were pre- 1) (rail) in 2017 Term p.a. total viously operated by DB Regional Bus.

Nuremberg S-Bahn (metro) 12/2018 – 12/2030 7.3 88.1 In the first half of 2017, we took part in 56 tender proce- Network 6b – Rhine-Neckar S-Bahn (metro) 12/2020 – 12/2034 6.0 82.5 dures (first half of 2016: 69 tenders) with a volume of Network 4 Rhine Valley 06/2020 – 12/2032 4.1 51.2 41 million Nkm (first half of 2016: 56 million Nkm). In the E-Network Saar RB lot 1 12/2019 – 12/2034 3.2 47.3 tender procedures in which we took part, we were suc- Network 11 Hohenlohe- Franken-Untermain 12/2019 – 12/2031 3.4 40.8 cessful in 21% of them (first half of 2016: 39%). Usedom subnetwork 12/2017 – 12/2030 1.4 18.2 RB 27 (NRW) 12/2019 – 12/2026 2) 2.4 16.8 Nuremberg – Coburg – State border 12/2017 – 12/2023 0.7 4.4 Total 1) 28.6 349.2

1) Differences due to rounding are possible. 2) Option for extension.

28 Development of business units

≈≈ Events in the first half of 2017 of 90 passenger cars can be hired due to the continuing Vehicle measures implemented existing vehicle failures. Existing DB Regional vehicles The measures designed to improve our fleet include: rede- are being deployed until the defects are remedied. sign of interiors, installing passenger information and video ◊◊ The delivery of eight pre-series vehicles of the 490 recording systems, and repainting. series is expected in October 2017 for the Hamburg ◊◊ 66 vehicles from the 423 series were entirely replaced S-Bahn (metro). Bombardier has confirmed that the 52 for operating the Stuttgart S-Bahn (metro) by the middle series vehicles ordered will be delivered in the period of 2017. between May and December 2018. ◊◊ 25 vehicles from the 644 series were modified for the ◊◊ We expect delays of over two years in the delivery of transitional Baden-Württemberg regional contract. This Link diesel multiple units from PESA (632/633 series) includes the installation of lifting devices for passengers for the Sauerland network and for the Dreieich Railway with impaired mobility. Furthermore, a total of 23 double-­ and of one year on average for the Allgäu diesel network. ­deck cars will be air-conditioned by the end of 2017, and ◊◊ There is a delay in the delivery of the vehicles ordered 19 diesel of the 641 series will be redesigned. from Skoda for the Nuremberg-Ingolstadt-Munich-­ ◊◊ 56 out of a total of 91 electric multiple units from the 425 Express up to mid-2018. series were modernized for the Rhine-Neckar S-Bahn (metro). The project runs until the middle of 2018. Investments ◊◊ On January 1, 2017, the sale of the 51% share in Regional­ Delays in vehicle deliveries verkehr GmbH (RVD) was sold to the existing We were able to vastly improve vehicle availability. Delays joint shareholder, the district of Saxon Switzerland-­ and restrictions relating to the delivery of new trains did, ­Eastern Ore Mountains. The company is not included however, occur: anymore in the DB consolidated financial statements. ◊◊ The delayed deliveries of the 2010 double-deck cars manufactured by Bombardier that started in December ≈≈ Development in the first half of 2017 2015 are expected to be completed in 2017 with the ◊◊ In the rail line of business, increases in delivery of the last central carriages for the Schleswig-­ performance from awarded tenders Holstein network transport contracts Central (3), North-­ exceed losses from lost transport contracts. ­South in Brandenburg (3) and the Main-Spessart-­Express ◊◊ Delays in vehicle deliveries mean that in (4). At the end of 2017, delivery will begin replacement concepts are still needed. alongside this for the Main-Neckar-Ried transport con- ◊◊ Positive impact on profits due to the tract (75 central and driving trailers) and the driving discontinuation of the long-distance bus trailers (78) for the other networks. business at the end of 2016. ◊◊ In January 2017, Bombardier also delivered the last of ten optional vehicles of the 430 series ordered in addi- H 1 Change tion for the Stuttgart S-Bahn (metro) in 2014. The 430 ¿ † DB Regional 2017 2016 absolute %

series fleet in Stuttgart may continue to be used, but Punctuality (rail) (%) 95.0 95.2 – – without the sliding steps boarding system. Since early Punctuality (bus) (%) 91.2 91.2 – – 2016, this boarding system has been tested on seven Passengers (million) 1,285 1,267 +18 +1.4 vehicles while in operation. Other faults still exist and thereof long-distance bus – 0.4 – 0.4 – 100 Volume sold (million pkm) 24,101 24,068 +33 + 0.1 work to remedy them is still ongoing. thereof long-distance bus – 124.7 – 124.7 – 100

◊◊ After the test run had been completed in June 2017, 20 Total revenues (€ million) 4,304 4,280 +24 + 0.6 of the 147 series ordered from Bombardier in External revenues (€ million) 4,254 4,223 +31 + 0.7 2013 were accepted under the contract with the reser­­va­ Rail concession fees (€ million) 1,934 1,964 – 30 – 1.5 EBITDA adjusted (€ million) 634 651 –17 – 2.6 ­tion of all rights arising due to power units still missing. EBIT adjusted (€ million) 314 334 – 20 – 6.0 The vehicles were scheduled for delivery in 2015. Gross capital expenditures (€ million) 164 137 +27 +19.7 ◊◊ In December 2016, DB Regional rented a total of 15 loco- | Employees as of Jun 30 (FTE) 35,631 35,957 – 326 –0.9 motives and three diesel rail cars from Paribus for deployment in the Schleswig-Holstein Netz West trans- port contract. In the current year, only 50 out of a total

29 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Punctuality in rail transport was almost unchanged. The Rail line of business slight decline can be attributed to the lower punctuality ◊◊ Increased performance from data for the S-Bahn (metro) services. Punctuality in regional newly awarded tenders. transport has remained stable. ◊◊ Delays in vehicle deliveries require Punctuality in bus services was stable. further replacement concepts. The development in performance in rail transport was marked by a slight increase in the number of passengers and H 1 Change the volume sold. The volume produced decreased slightly ¿ † Rail line of business 2017 2016 absolute % due to performance losses. Passengers (million) 984.9 967.1 +17.8 +1.8 The development in bus services was marked by a Volume sold (million pkm) 20,856 20,524 +332 +1.6 decline in volume sold and volume produced. The number Volume produced (million train-path km) 228.6 229.9 – 1.3 – 0.6 of passengers was almost unchanged. Long-distance bus Total revenues (€ million) 3,823 3,790 +33 + 0.9 External revenues (€ million) 3,683 3,621 + 62 +1.7 activities were discontinued in the fall of 2016. Rail concession fees (€ million) 1,934 1,964 – 30 – 1.5 The economic performance of DB Regional is particularly EBITDA adjusted (€ million) 588 592 – 4 – 0.7 affected by the development of the higher-revenue and EBIT adjusted (€ million) 292 298 – 6 – 2.0 higher-performance rail line of business (share of revenues: Gross capital expenditures (€ million) 126 112 +14 +12.5 | Employees as of Jun 30 (FTE) 27,084 27,133 – 49 – 0.2 87%). Revenues increased slightly. This was primarily driven by an increase in the rail line of business due to pricing factors. Concession fees fell slightly. The performance-­ Performance development in the rail line of business was based decline in the development of the bus line of business mainly positive. The increase in the number of passengers had an opposite effect as well. and volume sold resulted from awarded tenders, in partic- The other operating income (+13.0%) recorded signifi- ular the Schleswig-Holstein West network, which more than cant growth, mainly due to the reimbursement of taxes on compensated the effects from lost transport contracts. The fuel elements. This was partly offset by lower compensation volume produced decreased slightly due to performance payments in connection with vehicle projects. losses. The increase in the cost of materials (+1.6%) can be at­ The development of revenues was better mainly due to tribut­ed to the rail line of business. In contrast, the decrease prices. Concession fees fell as a result of payments in con- in the bus line of business (–8.2%) had a positive effect. nection with settlements with the Berlin-Brandenburg Personnel expenses (+3.0%) increased mainly as a result transport association for previous years and as a result of of collective bargaining agreement. A lower number of em­­ penalties imposed and train cancellations. ployees in the bus line of business had a moderating effect. Other operating income fell (–2.8%), partly due to The other operating expenses (–3.3%) declined due, lower compensation for damages in connection with vehicle among other things, to the discontinuation of the long-­ projects. Increased internal clearing transactions had a distance bus activities. moderating effect. Depreciation (+0.9%) rose slightly. A key reason for this Cost of materials (+0.3%) remained almost stable. Higher was a capital expenditure-based increase in depreciation in expenses for the maintenance of vehicles mainly for the the bus line of business. Berlin S-Bahn (metro) and price-driven higher costs for the The adjusted EBIT is generated by 93% in the rail line of use of infrastructure were primarily compensated almost business and by 7% in the bus line of business. The dispro- entirely by the reimbursement of the taxes on fuel elements. portionate rise in expenses resulted overall in a decrease in Personnel expenses (+4.2%) increased as a result of a the adjusted EBITDA and EBIT profit figures. In contrast, collective bargaining agreement. the discontinuation of the long-distance bus activities had Other operating expenses (–1.6%) declined. a positive effect. Depreciation (+0.3%) was virtually unchanged. Gross capital expenditures increased, primarily due to Overall, the increased income was not able to compen- the procurement of vehicles. sate for the charges particularly from higher maintenance 76% of the employees are employed in the rail line of and personnel expenses and the adjusted EBITDA and EBIT business, 24% in the bus line of business. The number of therefore fell. employees declined driven, among other things, by slight portfolio adjustments made in the bus line of business.

30 Development of business units

Gross capital expenditures rose due to vehicle procurements. It was only possible to offset the decline in income partly Significantly higher investment grants for vehi­­­cles, particu- with lower burdens on the expenses side. Adjusted EBITDA larly in connection with the Stuttgart S-Bahn (metro) trans­­­ and EBIT fell accordingly. In contrast, the discontinuation port contract resulted in a decline in net capital expenditures. of the long-distance bus activities had a positive effect. The number of employees was almost unchanged. Due to extensive vehicle procurements for new transport services obtained, gross capital expenditures increased Bus line of business significantly. ◊◊ Portfolio adjustments made. The number of employees fell as a result of portfolio ◊◊ Positive impact on profits due to the discontinuation adjustments. New deployments for transport services were of the long-distance bus business in the fall of 2016. partly compensated for by this.

H 1 Change ≈≈DB Arriva business unit

¿ † Bus line of business 2017 2016 absolute %

Passengers (million) 299.7 299.6 + 0.1 – ≈≈ Events in the first half of 2017 thereof long-distance bus – 0.4 – 0.4 – 100 Awarded transport contracts Volume sold (million pkm) 3,244 3,544 – 300 – 8.5 thereof long-distance bus – 124.7 – 124.7 – 100 Volume Volume produced (million bus km) 253.8 284.8 – 31.0 – 10.9 (million train km)

Æ Concluded transport contracts Total revenues (€ million) 613 650 – 37 – 5.7 (rail) in 2017 Term p.a. total 1)

External revenues (€ million) 571 602 – 31 – 5.1 Sweden Pågatåg 12/2018 – 12/2026 12.1 96.8 EBITDA adjusted (€ million) 46 58 –12 – 20.7 Achterhoek- EBIT adjusted (€ million) 22 35 – 13 – 37.1 The Netherlands Rivierenland 2) 12/2020 – 12/2025 3.7 18.5 Gross capital expenditures (€ million) 38 25 +13 +52.0 Total 1) 15.8 115.3 | Employees as of Jun 30 (FTE) 8,546 8,824 – 277 –3.1 1) Differences due to rounding are possible. 2) Extension of the existing contract. Development in the bus line of business was marked by a decline in volume sold and volume produced as a result of Volume the discontinuation of the long-distance bus business in the (million bus km) Æ Concluded transport contracts fall of 2016, of portfolio adjustments in the Eastern region (bus) in 2017 Term p.a. total 1) and of transport contracts not being extended in Hesse. London The number of passengers was at the level of the first half Great Britain (19 routes) 5 years each 21.8 109.2 Sumpersko, of 2016. The positive development in the central region had Zabrezsko, Mohel- a compensating effect. nicko (Olomoucky region (Central Portfolio adjustments, among other things, also had an Czech Republic Moravia)) 01/2018 – 01/2028 4.7 47.5 impact on the development of revenues, which was weaker Achterhoek- The Netherlands Rivierenland 2) 12/2020 – 12/2025 9.0 45.0 as a whole. Prostejovsko north The other operating income (+4.2%) rose, partly due to west (Olomoucky region (Central higher compensation payments for damage. Czech Republic Moravia)) 01/2018 – 01/2028 2.4 24.4 The cost of materials (–8.1%) declined, mainly as a result Olomoucko north east (Olomoucky of portfolio adjustments, the discontinuation of long-dis- region (Central Czech Republic Moravia)) 01/2018 – 01/2028 1.8 18.2 tance bus activities, and a reduced volume of purchased Litovelsko contractor services as a result of performance losses. (Olomoucky region Czech Republic (Central Moravia)) 01/2018 – 01/2028 1.7 17.1 Personnel expenses (–1.0%) also fell as a result of port­ Prerovsko north ­folio adjustments. Offsetting effects from the growth in fares (Olomoucky region Czech Republic (Central Moravia)) 01/2018 – 01/2028 1.6 16.2 and transport services obtained had a moderating effect. Hranicko (Olo- The other operating expenses (+19.6%) increased as a moucky region Czech Republic (Central Moravia)) 01/2018 – 01/2028 1.5 15.2 result of a new line of business allocation. This was com- London (five pensated for by the discontinuation of long-distance bus Great Britain separate lines) 2) 2 years each 5.5 11.1 3) activities. Other 1 – 10 years 17.9 41.2 1) The higher depreciation (+4.3%) resulted, among other Total 67.9 345.1 1) things, from a capital expenditure-based increase in prop- Differences due to rounding are possible. 2) Extension of the existing contract. erty, plant and equipment. 3) Including extension of the existing contract.

31 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Transport contract awarded ≈≈ Development in the first half of 2017 in southern Sweden ◊◊ The start of transport operations in the DB Arriva will continue to offer services on the Pågatågen UK Trains line of business and the Netherlands rail network in southern Sweden in an area including the are the main drivers of the development. cities of Malmö, Helsingborg, Lund and Trelleborg for ◊◊ Acquisitions in the Mainland Europe line of another eight years. Following an open invitation to tender, business also have positive effects. DB Arriva was awarded a contract with a revenue volume ◊◊ The UK Bus line of business continues to face a of € 550 million for the period from December 2018 to challenging market and competitive environment. December 2026. DB Arriva is increasing the number of con- ◊◊ Weaker pound leads to negative exchange nections significantly and expanding the fleet from 69 to rate effects. 99 trains. A new digital mobility portal will improve pas- senger information and a new traffic control center will H 1 Change optimize operational procedures. ¿ † DB Arriva 2017 2016 absolute %

Punctuality rail (%) 93.2 91.5 – – Expansion of the e-bus fleet Passengers (million) 999.7 854.4 +145.3 +17.0 in the Czech Republic Volume sold rail (million pkm) 6,560 5,076 +1,484 +29.2 In the eastern Czech city of Třinec, DB Arriva has begun Volume produced (million train-path km) 92.3 75.1 + 17.2 + 22.9 Volume produced (million bus km) 543.2 517.5 + 25.7 + 5.0 offering transport services with ten electric buses. The Total revenues (€ million) 2,662 2,529 + 133 + 5.3 Škoda Perun vehicles have a range of 130 km. DB Arriva External revenues (€ million) 2,659 2,526 + 133 + 5.3 uses 14 electric buses in the Czech Republic. EBITDA adjusted (€ million) 238 232 + 6 + 2.6 EBIT adjusted (€ million) 110 106 + 4 + 3.8 Other events Gross capital expenditures (€ million) 184 127 + 57 + 44.9 | Employees as of Jun 30 (FTE) 54,145 51,618 +2,527 + 4.9 ◊◊ DB Arriva has developed a transport solution in the Netherlands that cuts barriers and makes it possible for Punctuality in rail passenger transport (Great Britain, people with disabilities to use public transport inde- Denmark, Sweden, the Netherlands and Poland) increased pendently. This solution – the so-called Voor Elkaar Pas in the first half of 2017. This is mainly due to the continuing (“Together we are strong”) – includes a new public operational improvements and the start of operations of the transport travel card, personal care services as well as and services in 2016. free transport for accompanying persons. The development in the number of passengers was posi- ◊◊ Since March 2017, ArrivaClick has allowed passengers in tive in all lines of business. The volume produced and sold in the English county of Kent to request a minibus from a rail transport increased, driven by Arriva Rail North. The departure point to a destination of their choice. Arriva- main drivers in the bus business were the new services in the Click automatically matches the journey with other pas- Netherlands and the acquisitions made in the previous year. sengers whose destination is in the same direction. The UK Bus line of business generated 20% of DB Arrivaʼs ◊◊ Arriva Rail North is investing in modernizing its trains revenues, the UK Trains line of business generated 41%, and as part of a capital expenditure program. The trains are the Mainland Europe line of business generated 39%. The being repainted and refurbished with modernized inte- increase in revenues in the first half of 2017 is mainly due to riors. The contract, launched in 2016, includes plans for the first-time full inclusion of Arriva Rail North and Arriva Rail the gradual introduction of Driver Controlled Operations. London and the new services in the Netherlands. In addition, The plan is meeting resistance from the RMT (National the previous yearʼs acquisitions had a positive effect. How- Union of Rail, Maritime and Transport Workers), which ever, exchange rate effects from the development of the has regularly called for strikes since the beginning of British pound had a dampening effect. 2017. Our competitors are also affected. DB Arriva con- tinues to focus on resolving the dispute.

32 !!!

Development of business units

The development of other operating income (+44.9%) was UK Bus line of business primarily influenced by new services and the acquisitions ◊◊ The market and competitive environment in the previous year. Exchange rate effects, in contrast, had continues to be challenging. a dampening impact. ◊◊ Extensive countermeasures initiated. Cost of materials (+14.3%) and personnel expenses ◊◊ Weaker pound leads to negative exchange (+12.8%) increased. This was mainly due to the expansion rate effects. of services. The development of personnel expenses was also negatively impacted by the one-off effect in connec- H 1 Change tion with pension adjustments, which had the effect of ¿ † UK Bus line of business 2017 2016 absolute % reducing costs in the first half of 2016. To some degree, Passengers (million) 350.0 343.0 +7.0 +2.0 exchange rate effects had the effect of reducing costs both Volume produced (million bus km) 180.4 182.6 – 2.2 – 1.2 in material and personnel expenses. Total revenues (€ million) 546 620 – 74 – 11.9 The decline in other operating expenses (–13.3%) was External revenues (€ million) 545 616 – 71 – 11.5 EBITDA adjusted (€ million) 69 81 – 12 – 14.8 mainly the result of lower franchise payments due to fran- EBIT adjusted (€ million) 32 39 – 7 – 17.9 chise changes in UK Trains and exchange rate effects. Gross capital expenditures (€ million) 76 21 + 55 – Overall, the operational profit figures of adjusted EBIT | Employees as of Jun 30 (FTE) 16,349 16,789 – 440 – 2.6 and adjusted EBITDA rose slightly. The first-time full inclu- sion of routes started in UK Trains and the Netherlands in The increase in the number of passengers was primarily due the previous year, acquisitions made in the previous year, to contract changes in London. The volume produced, on and the operating development at UK Trains and Mainland the other hand, decreased as a result of a network review in Europe had a positive effect. The absence of one-off effects the regions partially offset by contract changes in London. from the first half-year of 2016 and exchange rate effects Negative exchange rate effects and lower revenues in had a dampening impact. the non-core business, including the cessation of patient Gross capital expenditures increased significantly in transport contracts, were partially offset by the newly in­­ the year under review. This was primarily due to vehicles tro­­duced transport routes in London. procured in connection with transport contracts awarded Cost of materials decreased (–18.2%), mainly as a result in London in the previous year and elsewhere in UK Bus of exchange rate effects and fewer vehicle purchases in the to support service delivery improvements. In addition, non-core business. scheduled capital expenditures for existing transport con- Personnel expenses declined (–8.1%) due to exchange tracts at Mainland Europe had a positive effect. Exchange rate effects. rate effects had a dampening impact. Adjusted EBITDA and adjusted EBIT decreased primarily DB Arriva employs 30% of its employees in the UK Bus due to negative exchange rate effects and the challenging line of business, 23% in the UK Trains line of business and market environment. 46% in the Mainland Europe line of business. The number Vehicle acquisitions in connection with the transport con­ of employees increased driven by the commencement of ­­­tracts awarded in London in the previous year as well as mea­ new operations and acquisitions. ­sures to improve services in the regions outside of London resulted in a significant increase in capital expenditures. The number of employees declined, largely due to the cessation of patient transport contracts in the previous year.

33 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

UK Trains line of business Mainland Europe line of business ◊◊ The commencement of operations in the ◊◊ The commencement of transport previous year is driving the development. operations in the Netherlands is the main ◊◊ Weaker pound leads to negative exchange driver of the development. rate effects. ◊◊ Positive effects also from acquisitions.

H 1 Change H 1 Change ¿ † UK Trains ¿ † Mainland Europe line of business 2017 2016 absolute % line of business 2017 2016 absolute %

Passengers (million) 206.3 92.3 +114.0 +124 Passengers rail (million) 58.2 51.9 + 6.3 +12.1 Volume sold (million pkm) 5,375 3,931 +1,444 +36.7 Passengers bus (million) 385.2 367.2 +18.0 + 4.9 Volume produced (million train-path km) 64.5 45.7 + 18.8 + 41.1 Volume sold rail (million pkm) 1,185 1,145 + 40 +3.5

Total revenues (€ million) 1,103 985 + 118 + 12.0 Volume produced (million train-path km) 27.8 29.4 – 1.6 – 5.4 External revenues (€ million) 1,086 969 + 117 + 12.1 Volume produced (million bus km) 362.8 334.8 + 28.0 + 8.4

EBITDA adjusted (€ million) 31 35 – 4 – 11.4 Total revenues (€ million) 1,071 978 + 93 + 9.5 EBIT adjusted (€ million) 16 20 – 4 – 20.0 External revenues (€ million) 1,028 940 + 88 + 9.4 Gross capital expenditures (€ million) 21 25 – 4 – 16.0 EBITDA adjusted (€ million) 146 137 + 9 + 6.6 | Employees as of Jun 30 (FTE) 12,509 11,172 + 1,337 + 12.0 EBIT adjusted (€ million) 71 66 + 5 + 7.6 Gross capital expenditures (€ million) 76 69 + 7 + 10.1 | Employees as of Jun 30 (FTE) 24,946 23,412 + 1,534 + 6.6 In the first half of 2017, performance development inUK rail transport improved significantly, mainly due to the Performance development in the Mainland Europe line of commencement of operations of Arriva Rail North and business was positive mainly as a result of newly com- Arriva Rail London in the previous year. menced services in the Netherlands (Limburg and ZOWAD) Revenue development was also positive as a result, par- in December 2016. In bus transport, the previous yearʼs tially offset by significant negative exchange rate effects. acquisitions in Italy, Spain and the Czech Republic had a Cost of materials (+22.5%) and personnel expenses positive effect. (+ 53.8%) were also significantly higher due to the com- Revenue development was also positive mainly driven mencement of the new operations, while exchange rates by the commencement of operations in the Netherlands had a dampening effect. The development of personnel and the previous yearʼs acquisitions. A portfolio change in expenses was also negatively impacted by the one-off Denmark had a small dampening effect in revenue. effect in connection with pension adjustments, which had The commencement of operations and acquisitions of the effect of reducing expenses in the first half of 2016. the previous year also increased cost of materials (+20.8%) Adjusted EBITDA and EBIT decreased. This was primarily and personnel expenses (+8.8%). The portfolio changes in due to the one-off effect in connection with pension adjust- Denmark had a small positive effect. ments and negative exchange rate effects. Adjusted EBITDA and adjusted EBIT increased due to The number of employees significantly increased as a improved performance in the Netherlands and acquisitions result of the impact of new operations of Arriva Rail North in the previous year. and Arriva Rail London. Gross capital expenditures increased primarily due to sched­­uled capital expenditures for existing transport contracts. The number of employees also increased mainly due to the commencement of operations in the Netherlands and acquisitions in the previous year. Portfolio changes had an adverse effect.

34 Development of business units

≈≈DB Cargo business unit Punctuality has declined mainly due to development in Germany, as a result of operating difficulties when intro- ≈≈ Events in the first half of 2017 ducing a new production system and due to storms when Partner in the Lean and Green initiative simultaneously increasing transport volume. DB Cargo takes a stand on even more environmental Performance development had declined primarily due protection on railways. All participating companies of the to negative development in . The volume non-profit initiative Lean and Green undertake to reduce of freight carried and sold fell slightly. Utilization per train their greenhouse gas emissions in logistics processes by increased slightly due to measures to increase efficiency. 20% in five years. The positive development of performance in compensated for this to some extent. Other events 82% of revenues are generated in Central Europe, 13% ◊◊ Since February, DB Cargo has been providing a daily in Western Europe and 5% in Eastern Europe. Revenues connection between the Belgian industrial region of were almost unchanged. Performance-based increases, Antwerp and the Ruhr region as well as the Rhine- especially in Central Europe (increased steel and military Neckar region with DBantwerp-rhine-shuttle. This ser- transport in Germany), were offset by negative exchange vice reduces transit times and increases transport rate effects and decreases in revenues in Western Europe. capacity and flexibility for customers. Other operating income (+16.3%) also recorded a sig- ◊◊ In cooperation with several freight railways, DB Cargo nificant increase, including that based on compensation successfully carried out the first direct rail transport payments for vehicles delivered late in Germany, growth in from China to Great Britain in January. In 18 days, it the sidings business in Southeastern Europe, and on the covered a distance of 12,000 km in Asia and Europe and Italian Government’s subsidy payments for DB Cargo Italia. was twice as fast as transport by sea and more cost-­ In Western Europe, negative currency effects and the oper- effective than transport by air. Trains should be running ating development in France, among other things, had a regularly over the medium term. moderating effect. ◊◊ DB Cargo and ScandFibre Logistics (SFL) have increased Cost of materials (+1.3%) rose slightly as a result of their transport contract to 1.2 million tons per year up higher transport services purchased in Central Europe and to 2019 from Sweden to Continental and Southeastern Eastern Europe and higher expenses for main- Europe. There are also approximately 12,000 wagon- tenance in Germany. Furthermore, the costs of infrastruc- loads traveling in the opposite direction to Sweden. ture utilization were higher in Great Britain. The reimburse- ment of taxes on fuel elements in Germany and exchange ≈≈ Development in the first half of 2017 rate effects had compensated for this. ◊◊ Positive stimuli from the market and Personnel expenses (–1.4%) were declining, mainly due competitive environment in Germany. to exchange rate-related changes and due to a lower num­ber ◊◊ Positive development of steel transport of employees. Fare adjustments had the opposite effect. in Great Britain and Germany. Other operating expenses (–10.6%) fell mainly due to ◊◊ Restructuring promoted in France the activation of IT development costs in Germany, cost and Great Britain. reductions at ECR and exchange rate effects. Depreciation (+20.9%) rose significantly driven in par- H 1 Change ticular by the activation of IT development costs and the acquisition of the utilization right covering locomotive ¿ † DB Cargo 2017 2016 absolute %

capacities in Germany. Punctuality (%) 73.8 75.7 – – Freight carried (million t) 139.2 140.2 –1.0 –0.7 Overall, the income rose somewhat more sharply than Volume sold (million tkm) 47,756 47,830 –74 –0.2 expenses, and the adjusted EBITDA and EBIT therefore Volume produced (million train-path km) 89.1 90.4 –1.3 –1.4 improved. The EBIT margin also improved. The develop- Capacity utilization (t per train) 535.7 529.1 + 6.6 +1.2

ment was driven by Central Europe whereas Western Total revenues (€ million) 2,306 2,312 –6 –0.3 External revenues (€ million) 2,150 2,154 –4 –0.2 Europe had a moderating effect. EBITDA adjusted (€ million) 82 39 +43 +110 Gross capital expenditures rose as a result of develop- EBIT adjusted (€ million) –28 –53 +25 –47.2 ment in Central Europe. In contrast, capital expenditures EBIT margin (adjusted) (%) –1.2 –2.3 – – fell in Western Europe and Eastern Europe. Gross capital expenditures (€ million) 110 52 +58 +112 | Employees as of Jun 30 (FTE) 28,964 30,155 –1,191 –3.9

35 !!! !!!

Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

A total of 65% of employees are employed in Central Europe, ≈≈ Western Europe 16% in Western Europe, and 14% in Eastern Europe. The ◊◊ Restructuring measures in Great Britain decline can be attributed to development in Central Europe and France. and Western Europe. ◊◊ Quality limitations at ECR. ◊◊ Positive development in steel transport ≈≈ Central Europe in Great Britain. ◊◊ Positive market and competitive environment. ◊◊ Additional transport services in Italy H 1 Change and Scandinavia. ¿ † Western Europe 2017 2016 absolute %

◊◊ Limitations in the quality of services in Germany. Freight carried (million t) 29.2 31.7 –2.5 –7.9 Volume sold (million tkm) 6,831 6,964 –133 –1.9 H 1 Change Volume produced (million train-path km) 13.9 14.3 –0.4 –2.8

Total revenues (€ million) 353 393 –40 –10.2 ¿† Central Europe 2017 2016 absolute % External revenues (€ million) 288 321 –33 –10.3

Freight carried (million t) 126.5 124.9 +1.6 +1.3 EBITDA adjusted (€ million) 3 11 –8 –72.7 Volume sold (million tkm) 38,721 38,579 +142 + 0.4 EBIT adjusted (€ million) –24 –16 –8 + 50.0 Volume produced (million train-path km) 71.3 72.0 –0.7 –1.0 Gross capital expenditures (€ million) 18 27 –9 –33.3

Total revenues (€ million) 2,465 2,429 +36 +1.5 | Employees as of Jun 30 (FTE) 4,694 5,198 –504 –9.7 External revenues (€ million) 1,764 1,741 +23 +1.3 EBITDA adjusted (€ million) 111 61 +50 +82.0 EBIT adjusted (€ million) 34 3 +31 – In Western Europe freight carried, volume sold and volume Gross capital expenditures (€ million) 91 23 + 68 – produced fell, partly considerably. A rise in steel transport | Employees as of Jun 30 (FTE) 18,757 19,682 –925 –4.7 in Great Britain was more than offset by significant declines in performance in France as a result of quality limitations. Performance development in Central Europe was positive. Revenues decreased considerably in the wake of perfor- An improved market and competitive environment were mance development and exchange rate effects. particularly notable here, as was higher crude steel produc- Other operating income (–26.0%) fell due to lower trans­ tion in Germany. Transport services were also increasing in ­­port services in France and lower internal rental income for Italy at the same time. locomotives. The increase in revenues was largely driven by the in­­ The decline in cost of materials (–9.6%) was due to creased performance in Italy and Scandinavia, an improved ex­­change rate effects and significantly lower services market and competitive environment, and the increase in purchased. crude steel production in Germany. Personnel expenses decreased (–14.6%), mainly due to Other operating income (+4.4%) increased, mainly due the adjustment in the number of employees in Great Britain to higher compensation payments for damages arising from and France in line with business conditions. Exchange rate vehicle projects and subsidies in Italy. effects also had a positive impact. Cost of materials (+0.9%) increased as a result of higher Depreciation remained unchanged. transport services purchased and higher expenses for loco- The lower revenues were only partly compensated for motive maintenance (additional ultrasound tests and wheel by lower expenses, and the adjusted EBITDA and EBIT there­ set changes). Lower energy costs had a moderating effect. ­fore declined. Personnel expenses (+1.0%) increased slightly as a Gross capital expenditures were significantly lower. This result of collective bargaining agreements. This was coun- resulted, among other things, from delayed maintenance teracted by the lower number of employees. work on diesel locomotives in France and from capital Adjusted EBITDA and EBIT improved, driven in particular expenditures not yet made in Great Britain. by the increase in revenues. The number of employees declined following adjust- Gross capital expenditures increased significantly due ment to the business conditions in Great Britain and France. to the activation of IT development costs and higher capital expenditures in locomotives and freight cars. The number of employees had fallen mainly due to restructuring measures and natural fluctuation and changes within the Group in Germany.

36 Development of business units

≈≈ Eastern Europe ≈≈DB Schenker business unit ◊◊ Operational restrictions in Southeastern Europe. ◊◊ Changes in the customer portfolio weaken ≈≈ Events in the first half of 2017 profitability in Southeastern Europe. Expansion of the global network ◊◊ Increased competition in the sidings business Opening of new logistics hubs in Poland. ◊◊ A new logistics hub in Grenoble/France specializes in the needs of semiconductor manufacturers nearby and H 1 Change offers the highest standards for the storage of com- puter chips. ¿† Eastern Europe 2017 2016 absolute %

◊◊ The extension of the logistics facility in Strečno/Slo- Freight carried (million t) 8.4 7.8 + 0.6 +7.7 Volume sold (million tkm) 2,204 2,287 –83 –3.6 vakia from 5,000 m² to 8,000 m² improves the offer for Volume produced (million train-path km) 3.9 4.1 –0.2 –4.9 transport and warehouse logistics for car customers.

Total revenues (€ million) 141 125 +16 +12.8 ◊◊ A further area of 10,500 m² is rented in the logistics hub External revenues (€ million) 98 92 + 6 + 6.5 in Großbeeren. The new property serves as a warehouse EBITDA adjusted (€ million) 10 9 +1 +11.1 EBIT adjusted (€ million) 3 4 –1 –25.0 for various customers from the consumer goods and Gross capital expenditures (€ million) 2 3 –1 –33.3 industrial goods sectors. | Employees as of Jun 30 (FTE) 4,068 4,155 –87 –2.1 ◊◊ New logistics hub in Graz/Austria opened, thereby doubling the surface area in Styria. In Eastern Europe, the volume sold and the volume pro- ◊◊ Together with Duisburger Hafen AG, a logistics hub was duced grew more weakly, due in particular to a decline in the set up in the Duisburg port. From 2018, DB Schenker will international transport services in Southeastern Europe. be organizing the supply to the foreign plant for the The quantity of freight carried increased as a result, among Mercedes-Benz Vans business unit. other things, of growth in Poland. Revenue development was positive for performance-­ Cooperation agreement for developing related reasons. Positive exchange rate effects also had an autonomous vehicles effect. By signing the cooperation agreement on the development Other operating income adjusted for currency trans­ of high-tech trucks, DB Schenker confirmed collaboration lation effects was at a stable level. with MAN. The partners agreed the initial testing of pla- Cost of materials (+22.1%) increased, mainly as a result tooning in actual logistics operations. Long lines of heavy of increased maintenance costs and higher transport services goods vehicles in regular services will be tested in actual purchased in Poland. road traffic over several months with professional drivers. Personnel expenses (+9.7%) increased in Poland as a In the test phase beginning in the spring of 2018, platoons result of a collective bargaining agreement and in South- will be brought into use on the “digital motorway test field” eastern Europe as a result of a collective bargaining agree- on the A9 between the DB Schenker branch offices in ment and volumes. This increase was partly offset by the Munich and Nuremberg. lower number of employees. In particular, the positive revenue development has led Drive4Schenker launched successfully to an increased development of adjusted EBITDA. Due to Drive4Schenker, the online freight platform in European the increased depreciation (+40.0%), the development of land transport, has been launched successfully. Since Feb- the adjusted EBIT was negative. ruary, more than 1,000 freight loads have been managed Gross capital expenditures fell significantly. This can be digitally every day from 25 branch offices in 15 countries. attributed to the high capital expenditures in locomotives The rollout is gradually continuing. By the end of the year, in Poland in the first half of 2016. 5,000 loads will have been processed and other functional- The number of employees declined, mainly due to opti- ities will improve the platform. mization measures in Poland. New appointments in the Czech Republic had the opposite effect.

37 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Investments Volume development was positive in air and ocean freight. ◊◊ In February 2017, DB Schenker invested in uShip, Inc. by It was stable in European land transport. way of a financing round. With the USD 25 million in­ Revenues are generated 41% in European land trans- vestment (about € 24 million), DB Schenker secured an port, 43% in air and ocean freight, and 16% in contract assessor’s position on uShip’s . The logistics. The main drivers of the positive revenue trend online platform of uShip provides a digital addition to were the development in air and ocean freight and in Euro- DB Schenker’s traditional business model. pean land transport. Growth continued to be dynamic in contract logistics. Ongoing legal proceedings Gross profit +( 4.0%) continued to increase, most sig- ◊◊ DB Group is pursuing compensation for damages against nificantly in contract logistics. The development of gross the airlines that were part of the so-called air freight mo­­ profit in ocean freight was down, because the increase in nop­oly, which, according to the findings of various com- freight rates could only partly be passed on to the customer. petition authorities around the world, agreed on kerosene In comparison to revenue development, the increase in and security surcharges, among others from 1999 to at gross profit was disproportionately high, therefore the gross least 2006 at the expense of freight forwarders such as profit margin also declined. The main driver was ocean DB Schenker. Claims for damages have been pending freight. The other lines of business recorded increases or against several airlines in Germany and the USA since were at a stable level. 2014. In the first half of 2017, the first extrajudicial global Personnel expenses (+5.0%) were significantly higher. comparison was successfully concluded with an airline. This can be attributed specifically to a performance-based The pending legal dispute on this was partly resolved higher number of employees in all business lines and regions and the airline was also dismissed from the US lawsuit. as well as to wage increases. Adjusted for exchange rate Settlement discussions continued with other airlines effects, the rise was somewhat lower. that had complaints against them both in Germany and The adjusted EBIT is generated 30% in European land in the US lawsuit. transport, 44% in air and ocean freight, and 27% in contract logistics. The clearer increase in income compared to ex­­ ≈≈ Development in the first half of 2017 penses resulted in a higher adjusted EBITDA and adjusted ◊◊ Market and competitive environment EBIT. The positive development in operating profit was with positive stimuli. partly offset by the weak development in ocean freight. ◊◊ Strong growth in volumes overall. Operating profit was only slightly lower when adjusted for ◊◊ Rising freight rates in air and ocean freight. exchange rate effects. ◊◊ Ocean freight has an impact on profit Gross capital expenditures increased. The increase re­ development – European land transport and sult­­ed primarily from the Asia/Pacific region. Capital expen­ air freight achieve improvements. ­ditures continued to focus on the European region. ◊◊ Contract logistics remains dynamic. 28% of employees are employed in European land trans- port, 19% in air and ocean freight, and 30% in contract H 1 Change logistics. The number of employees has increased. The main driver was the business expansion in contract logistics. ¿ † DB Schenker 2017 2016 absolute %

Shipments in European land transport (thousands) 50,751 50,712 +39 + 0.1 Air freight volume (export) (thousand t) 613.1 550.6 + 62.5 +11.4 Ocean freight volume (export) (thousand TEU) 1,063.4 976.3 +87.1 +8.9

Total revenues (€ million) 8,103 7,431 + 672 +9.0 External revenues (€ million) 8,072 7,400 + 672 +9.1 Gross profit margin (%) 34.7 36.4 – – EBITDA adjusted (€ million) 305 294 +11 +3.7 EBIT adjusted (€ million) 208 200 +8 +4.0 EBIT margin (adjusted) (%) 2.6 2.7 – – Gross capital expenditures (€ million) 76 72 +4 +5.6 | Employees as of Jun 30 (FTE) 69,370 66,822 +2,548 +3.8

38 Development of business units

≈≈ European land transport line of business Performance development in air and ocean freight was very ◊◊ Within the system and direct transport areas, the pleasing: focus is on international transport services. ◊◊ Volumes increased significantly in air freight. The largest ◊◊ Drive4Schenker implementation is progressing. relative growth was accounted for by trans-Pacific ser- ◊◊ Europe-wide cost-reduction initiatives launched. vices and the routes from Asia to Europe. In addition, the volume of transatlantic and Asian traffic, among H 1 Change others, and the routes from and to Latin America have clearly been developing positively. ¿ † European land transport 2017 2016 absolute %

◊◊ The ocean freight volume also increased significantly. Shipments in European land transport (thousands) 50,751 50,712 +39 + 0.1 Here in particular, growth on the trans-Pacific and intra-

Total revenues (€ million) 3,326 3,226 +100 +3.1 Asian routes and on routes between Asia and Europe External revenues (€ million) 3,299 3,197 +102 +3.2 had an impact. Transport services from and to Latin EBITDA adjusted (€ million) 96 91 +5 +5.5 EBIT adjusted (€ million) 62 58 +4 + 6.9 America and on the transatlantic routes also contrib- | Employees as of Jun 30 (FTE) 19,661 19,437 +224 +1.2 uted to growth. Revenue development was also positive in both air and ocean In a market environment which was marked by growing freight. The main drivers of revenue development were demand, volume development in European land transport freight rate development and positive volume development. was stable. A decline in the parcel business (– 6.3%) was Cost of materials also rose according to volume and entirely compensated by higher volumes for bulk (+2.7%) freight rate development. and in particular for direct transport (+7.3%). Personnel expenses rose due to volume and price. Despite the stable shipping volume, the development The adjusted EBITDA and EBIT profit and loss declined as in revenues was better due to growth in bulk and direct a result of increased ocean freight rates. Air freight improved. transport. The number of employees increased slightly. Cost of materials increased. This was the result in par- ticular of bulk and direct transport. ≈≈ Contract logistics/SCM line of business Personnel expenses rose due to volume and price. ◊◊ Good business development in The development of the adjusted EBITDA and EBIT was the existing and new customer base. better as a result of good business development. ◊◊ Further capacity expansion. The number of employees has increased as a result of business development. H 1 Change

¿† Contract logistics/SCM 2017 2016 absolute %

≈≈ Air and ocean freight line of business Total revenues (€ million) 1,301 1,218 +83 + 6.8 ◊◊ Significant effects due to freight rate development. External revenues (€ million) 1,300 1,218 +82 + 6.7 ◊◊ Focus in ocean freight on efforts to optimize EBITDA adjusted (€ million) 79 70 +9 +12.9 capacity utilization, costs and purchase prices. EBIT adjusted (€ million) 56 43 +13 +30.2 | Employees as of Jun 30 (FTE) 20,572 19,012 +1,560 +8.2 ◊◊ Focus in air freight on broadening the customer base and improving the cargo mix. Revenue development in the contract logistics/SCM line of H 1 Change business remained very positive. The good business devel- opment made itself noticeable here in the existing and new ¿† Air and ocean freight 2017 2016 absolute %

customer base. Total and external revenues accordingly Air freight volume (export) (thousand t) 613.1 550.6 + 62.5 +11.4 Ocean freight volume (export) developed positively. (thousand TEU) 1,063.4 976.3 +87.1 +8.9

With the expansion in business, the cost of materials Total revenues (€ million) 3,476 2,988 +488 +16.3 also increased due to the higher number of employees and External revenues (€ million) 3,473 2,986 +487 +16.3 EBITDA adjusted (€ million) 98 106 –8 –7.5 personnel expenses. EBIT adjusted (€ million) 91 99 –8 –8.1 The development of adjusted EBITDA and EBIT was | Employees as of Jun 30 (FTE) 13,163 13,104 +59 + 0.5 better as a result of good business development. The dynamic business development was also reflected in an increase in the number of employees.

39 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

≈≈DB Netze Track business unit Wayside monitoring systems in operation Wayside monitoring takes advantage of digitalization by ≈≈ Events in the first half of 2017 enabling predictive maintenance. The goal is to improve rail Digital construction planning becomes reality system quality while lowering maintenance costs by recog- Since the BMVI made about € 20 million available to us in nizing potential irregularities at an early stage so that mal- 2016 to test Building Information Modeling (BIM) in 13 functions can be avoided. To that end, wayside moni­­toring complex, large-scale infrastructure projects, intensive checks the condition of rolling stock in day-to-day oper­ preparations are underway for the transition from conven- ations, virtually as it passes by. For acoustic diagnostics, tional planning to BIM. Pilot projects include sections of microphones on the tracks record train noises. If the results the Rhine Valley Rail (Rheintalbahn, Karlsruhe ‒ ), the deviate from the norm, vehicle maintenance is activated Emmerich ‒ Oberhausen expansion line, the Rhine-Ruhr- long before any defect in the train can arise. The trial run of Express and the rail connection to the fixed link across the video-based diagnostics was launched in 2017. the Fehmarn Belt. BIM will also be used for railway bridge renovations. Rollout of point machine diagnostics on track In order to optimize the availability of switches, a digital Progress in standardizing maintenance remote diagnostic system is used to detect potential faults In order to improve rail infrastructure quality, we take before they can occur. The diagnostics platform DIANA ad­van­­­tage of digitalization opportunities for maintaining gives maintenance an indication of a possible fault, allowing the rail network. preventive measures to be taken. In the future, this should Within the framework of the standardization of produc- make it possible to reduce drive-related switch defects by tion system maintenance (Standardisierung Produktions- up to 50%. By mid-2017, more than 9,000 switches had been system Instandhaltung; SPI), the scheduling and feedback equipped with actuating current diagnostic systems. Pre- process of operational maintenance have been standard- dictive maintenance via the DIANA diagnostics platform ized and digitalized company-wide. The stage 1 rollout will gradually be expanded to include other components. was completed on schedule; nationwide, all maintenance operations are now digital. SPI stage 2 started in 2017. The New emergency technology in use focus here is on standardizing and improving workflows DB Netze Track is carrying out large-scale modernization and processes, especially work preparation and execution. of its machinery and vehicle fleet (for example, emergency The pilot locations are the operations and maintenance technology, measurement technology, and track mainte- sites in Frankfurt and Würzburg; nationwide rollout is nance vehicles). About € 650 million will be invested in this planned for October. effort between 2015 and 2024. Emergency cranes and rescue trains are important components of this capital Group pushes ahead with digitalization of expenditures initiative. By 2019, all old vehicles using command and control technology emergency technology will be replaced at a cost of about As part of a total of four pre-series production projects, we € 150 million. In 2017, for example, a new rescue train was are continuing to press ahead with the digitalization of placed into service at the Würzburg site. command and control technology (Leit- und Sicherungs- technik; LTS), thereby laying the technical foundation for Requirement plan implementation agreement nationwide coverage with the European Train Control definitively negotiated System (ETCS) Level 2 and implementation of the opera- Along with BMVI, we have made important progress to- tional control strategy. The technical platform for this will ward speeding up the implementation of major projects. be a modular signal tower with standardized interfaces The requirement plan implementation agreement (Be- (digital signal tower; DSTW) specified byDB Netze Track darfs­planumsetzungsvereinbarung; BUV) scheduled to go and an integrated operating station. Communications will into effect on January 1, 2018 is a new model for the Federal be carried over an IP network specially developed to satisfy Government to finance new track infrastructure construc- specific railway requirements, taking into account rail infra- tion and expansion projects. In the future, new plans and structure safety requirements. results of early public participation will be presented once For us, the standardized LTS platform represents the a year to the Bundestag in order to improve involvement basis for a later site rollout, which, over the long term, by political leaders. The current plan lump sum will be abol- should replace the fragmented production system com- ished. Instead, in the future the Federal Government will prised of the most divergent generations of technology. subsidize total project costs, while DB Group will cover the

40 Development of business units

economically viable share of the project portfolio. Planning validated and confirmed that costing was done appropri­- support from the Federal Railway Authority (Eisenbahn- ately.­­ The Federal Government recommended the inclusion Bundesamt; EBA) will increase and noncompliance with in category A of the Municipal Transport Financing Act commissioning dates will be penalized. (Ge­meindeverkehrsfinanzierungsgesetz; GVFG) program.

Progress with regard to new construction Expansion of the Cologne S-Bahn and expansion measures (metro) on target Full opening of German unification transport Core elements for the elimination of the bottleneck in the project no. 8 on track high-traffic major rail hub in Cologne are the expansion of Commercial operation of VDE 8 on the new construction line the S-Bahn (metro) main line (Cologne Convention Center/ Ebensfeld ‒ Erfurt will commence on December 10, 2017. In Deutz ‒ central station ‒ Cologne Hansaring) and the use passenger transport, this will reduce the Munich ‒ Berlin of modernized, more powerful command and control travel time to under four hours. By the time this is placed technol­ogy. The expansion of both S-Bahn (metro) lines is into service, portions of the expansion line Ebensfeld ‒ part of an overall concept, consisting of 15 infrastructure Nuremberg will also be expanded to four tracks. On the measures, which is designed to effectively take pressure new construction line Ebensfeld ‒ Erfurt, as well as on the off the Cologne hub. The project is currently in the pre- new construction line Erfurt ‒ Halle/Leipzig that was placed planning phase; the first track layout designs are being into service in 2015, the newest version of the European developed and will be coordinated with the affected Train Control System (ETCS) will be used. On an approxi- stakeholders at an early stage. For the S13, the expansion mately 12 km section of the hub in Halle, construction is from Troisdorf to Bonn-Oberkassel, work is progressing underway on bridges, track, station, marshaling yard and according to schedule. signal tower technology. Extensive construction work is also taking place at the Leipzig hub and on feeder lines. Work begins on Emmerich ‒ Oberhausen expansion line Progress on the rail connection to the fixed On January 20, 2017, work began on the Emmerich ‒ Ober- link across the Fehmarn Belt hausen expansion line. The first plan approval decision was The project is in the design and approval planning stage. announced in October 2015. All 12 plan approval proce- Section-by-section submission of the approval documents dures (PFVs) have been disclosed; to date, ten public hear- to the EBA should begin by the fall of 2017. Hearings of ings have been held. The plan approval decisions are now the parties involved are currently being held as part of the expected, one after another, for the individual sections. plan approval procedure for the belt tunnel being planned In March 2017, a joint solution was reached by the seven by the Danish project company. At the present time, the neighboring communities, the state of North Rhine-West- Fehmarn Belt Tunnel is not expected to start operations phalia, the Federal Government and DB Group re­garding before 2028. The Belt crossing and the rail link will also the uniform rescue concept. Next, the rescue concept will involve renovating the Fehmarn Sound crossing. The bases be included in the ongoing plan approval procedures. for scenario analyses are currently being worked out. Construction of Rhine-Ruhr-Express Construction begins on second main officially begins S-Bahn (metro) line in Munich Construction on the Rhine-Ruhr-Express (RRX) project The symbolic start of construction on the project took place officially began in Cologne on March 8, 2017 with the plan on April 5, 2017. The initial preparatory construction work approval procedure. This first section was commissioned is currently underway at the central station and at Marien­ on May 22, 2017. However, additional sections for which ­hof. Planning approval has been received for all sections; construction permits have not yet been obtained will have however, some lawsuits regarding the eastern section are to be expanded in order to absorb the initial increase in still pending. Based on the initial calls for tenders, and as traffic. For reasons relating to customer tolerance, expan- part of an inquiry into whether costing was done properly, sion within the heavily overloaded Rhine-Ruhr region will the cost planning has been revised. As a result, total costs be possible only at a gradual pace, each time obtaining were set at € 3.84 billion, including a risk buffer.A group of a construction permit while maintaining uninterrupted ex­­­perts deployed by the Free State of Bavaria has reviewed, service. The RRX is one of the pilot projects of BIM [PAGE 40].

41 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Progress on the Hanau ‒ Nantenbach expansion line and 4,600 command and control technology systems. Structural engineering work was completed at the start of In addition, € 2.3 billion will be spent on numerous new 2017 and work on technical equipment was finished during construction and expansion projects. This will result in the spring. In addition, both new interlockings in Wiesthal intensive construction activities. In order to mini­­- and Laufach have been completed. As a result, all work was mize the impact on day-to-day operations, we concen- inspected and accepted according to schedule. By totally trate construction sites into corridors. A construction shutting down the Frankfurt ‒ Würzburg line (Aschaffen- site management round table has been set up to find burg to Wiesthal), DB Group was able to finish the first step optimal solutions for everyone involved in the trade-offs of commissioning the expansion line on June 19, 2017. The between travel and construction; round table partici- 160-year-old Schwarzkopf Tunnel and the shunting opera- pants include representatives of industry associations, tions required for freight transport were decommissioned the BMVI, the BNetzA, the TOCs, the public transport in the process. authorities, and DB Netz AG. Results will be presented by the end of the year. Progress on the Knappenrode ‒ Horka ‒ German/ ◊◊ On May 1, 2017, an ICE train derailment occurred at Polish border expansion line Dortmund’s central station. It caused extensive damage Recommissioning of the line – double-track and electrified – to infrastructure, with the concomitant effects on rail between Knappenrode and the German/Polish border is traffic in the greater Dortmund area. The extensive planned for December 2018. In January 2017, the last plan repair work was completed on May 24, 2017. We pro- approval decision (Niesky ‒ Horka) was issued. Now, con- vided support to the authorities in their investigation struction permits have been granted for the entire line. Con­ of the cause of the accident. ­struction of the last section will commence in August 2017. ≈≈ Development in the first half of 2017 Relocation of the Hamburg-Altona ◊◊ Higher revenues from price adjustments and long-distance higher volume produced by non-Group customers. The existing terminal station at Altona will be replaced by ◊◊ Personnel expenses rose due to collective wage a new station at the Diebsteich site for long-distance and increases and a greater number of employees. regional transport. The current S-Bahn (metro) station in ◊◊ Maintenance expenses increased. Altona will remain. Relocation of the Hamburg-Altona sta- ◊◊ Increase in capital expenditures on existing tion will be financed primarily through the Performance network and on expansion. and Financing Agreement, from the rail infrastructure com- panies’ (RICs) own funds and from the proceeds from the H 1 Change sale of land to the Free and Hanseatic City of Hamburg. ¿ † DB Netze Track 2017 2016 absolute %

It is expected that the plan approval will be issued by the 1) Punctuality (rail) (%) 94.2 94.2 – – end of 2017. Construction work is expected to start in mid- Punctuality DB Group (rail) (%) 94.5 94.6 – – 2018. Overall commissioning is scheduled to take place at Train kilometers on track infrastructure (million train-path km) 533.5 530.7 +2.8 + 0.5 the end of 2023. thereof non-Group railways 164.3 158.3 + 6.0 +3.8 Share of non-Group railways (%) 30.8 29.8 – –

Berlin ‒ Dresden expansion line on track Total revenues (€ million) 2,652 2,601 +51 +2.0 On December 10, 2017, sections of the route on which the External revenues (€ million) 746 694 +52 +7.5 Share of total revenues (%) 28.1 26.7 – – maximum speed has been raised to 160 km/h will be recom- EBITDA adjusted (€ million) 815 838 –23 –2.7 missioned, on schedule. This represented the completion EBIT adjusted (€ million) 389 398 –9 –2.3 of another stage toward reducing total travel time between Operating income after interest (€ million) 250 271 –21 –7.7 Berlin and Dresden to 80 minutes. Among other things, ROCE (%) 4.4 4.4 – – 18 railway crossings were replaced by railway or street over- Capital employed as of Jun 30 (€ million) 17,780 17,889 –109 –0.6 Net financial debt as of Jun 30 €( million) 10,092 10,224 –132 –1.3 passes, six stations were expanded or rebuilt and a total Redemption coverage 2) (%) 14.1 14.8 – – of six electronic interlockings were built. Gross capital expenditures (€ million) 2,907 2,495 + 412 +16.5 Net capital expenditures (€ million) 525 515 +10 +1.9 Other events | Employees as of Jun 30 (FTE) 44,717 43,948 +769 +1.7 1) ◊◊ In 2017, € 7.5 billion will be invested in the German rail Non-Group and DB Group train operating companies. 2) Change in method as of year-end 2016 [2016 INTEGRATED REPORT, PAGE 84 F.] network. € 5.2 billion will be available for the renovation retroactively adjusted. and maintenance of 1,650 km of track, 1,800 switches,

42 Development of business units

Punctuality of non-Group and DB Group TOCs in Germany ≈≈DB Netze Stations business unit remained unchanged, while the punctuality of TOCs within DB Group decreased slightly. ≈≈ Events in the first half of 2017 Train kilometers on track infrastructure increased due Quality initiative continues to higher demand from non-Group customers, especially As part of the RAILWAY OF THE FUTURE [PAGE 3 F.], fur- from freight transport, but also from regional transport. ther train station quality improvements were made. The decrease in demand from internal long-distance and In Hamburg, the S-Bahn (metro) stations Jungfernstieg freight transport customers had a dampening effect. and Stadthausbrücke kicked off a € 48 million capital expen- Total revenues increased, primarily because of price ad­­ diture program to modernize the S-Bahn (metro) network’s justments and increases in demand by non-Group railways. tunnel stations. Construction in the tunnel stations will be Other operating income increased (+3.4%), mainly carried out in accordance with the lean-construction prin- because of a change in the revenues recognized in the ciple. Here, the focus will be on proactively controlling pro- Swiss business unit and higher income from the refund of cesses, in order to minimize variances in the performance expenses for third-party facilities, compensation for dam- of individual stages of the work and to ensure a consistent ages and refund of expenses. production flow. The cost of materials rose (+2.7%) due to higher ex­­ Moreover, work continued on revitalizing transit sta- pen­ses for maintenance and winter snow and ice removal tions to improve their appearance in areas that are rele- services. vant to customers. Revitalization encompasses a broad, The increase in personnel expenses (+ 6.6%) was pri- individual spectrum of renovations, up to and including marily attributable to wage adjustments and the higher modernization efforts, such as the use of lighting, new number of employees. paint, updates to façades and decluttering. In the first half Among other things, other operating expenses rose of 2017, work was carried out at the Augsburg, Duisburg, (+2.1%) because of higher expenses from grants for third- Hagen, Hamburg-Altona, Hamm, Cologne Convention Cen­ party facilities, compensation for damages, expert opin- ter Deutz, Munich and Osnabrück stations. ions, and consulting and rents. Lower expenses from dis- To ensure the continuity of the cleaning initiative, we posal of property, plant and equipment had the opposite pilot-tested a new cleaning concept at selected stations. effect. One component is a permanent presence of cleaning staff Depreciation decreased (–3.2%) due to a lower level at the top 83 stations. Implementation of the cleaning con- of property, plant and equipment. cept began on July 1, 2017. Initially, all top stations, high- Overall, driven by personnel and maintenance expenses, speed stations, and mid-sized stations will be conver­­­ted. expenses exceeded the positive earnings trend, meaning Altogether, this will involve about 700 stations. Then, the adjusted profit figures EBITDA and EBIT declined. by the end of the year, the about 4,600 regional stations Higher interest expenses – mainly related to litigation will follow. risk – caused the operating interest balance to deteriorate. As a result, operating income after interest decreased even Other events further. ◊◊ On March 24, 2017, the City of Düsseldorf and DB Group The weaker profit development was offset by a slight signed the master agreement for the “Düsseldorf Cen- decrease in capital employed, leaving ROCE unchanged. tral Station Area Master Plan.” Net financial debt decreased, mainly due to lower fixed ◊◊ Station Food has opened its first two stores at the assets and net working capital. Karlsruhe and Munich central stations. The goal is to The development in operating profit led to a decrease develop and operate modern, attractive catering con- in redemption coverage. cepts in stations, with particular emphasis on healthy Gross capital expenditures increased due to higher vol- food produced in a sustainable manner. umes of capital expenditures for new construction and ◊◊ 77% of passenger stations are now handicapped-acces- expansion projects and for the existing network. Net capi­ sible; this covers 82% of all passengers. On average, ­­tal expenditures increased slightly. accessibility is improved at 100 stations each year. The number of employees rose slightly, mainly due to increases to cover existing and future staffing require- ments, especially in the maintenance and construction proj­ ­ect areas.

43 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

◊◊ On June 24, 2017, the new concourse building was opened Other operating income increased substantially (+24.6%), at the Münster central station. The concourse hall offers primarily due to seasonally higher construction cost sub- three floors and 8,000 m² of services and shopping, as sidies and higher insurance and compensation benefits, as well as office and administrative space. Including the well as sales of concourse buildings. work carried out in 2013, capital expenditures totaled The increase in the cost of materials (+7.5%) was mainly about € 76 million. attributable to higher expenses relating to the Railway of the Future, seasonal effects on maintenance measures and ≈≈ Development in the first half of 2017 additional expenses for personnel services. ◊◊ Increased demand from new traffic and Personnel expenses also increased significantly +( 10.8%), increased schedule frequencies. mainly due to the higher number of employees and, to a ◊◊ Rental revenues are driven by price and lesser extent, wage increases. margin effects. Depreciation declined slightly (–1.5%). ◊◊ Higher expenses for Railway of the Future Overall, higher income was unable to offset the increase and personnel burden performance. in expenses, which was driven primarily by higher mainte- ◊◊ Group presses ahead with measures to further nance expenses; the operating profit figures deteriorated reduce energy consumption. as a result. The weaker EBIT development and a slight increase in H 1 Change capital employed led to a noticeable decline in ROCE. Net financial debt increased, mainly as a result of higher ¿ † DB Netze Stations 2017 2016 absolute %

net capital expenditures. Facility quality (grade) 2.91 2.94 – – Station stops (million) 74.8 74.3 + 0.5 + 0.7 The profit-related decrease in operating cash flow and thereof non-Group railways 17.9 17.3 + 0.6 +3.5 higher financial debt caused redemption coverage to

Total revenues (€ million) 635 623 +12 +1.9 decrease. thereof station revenues 424 413 +11 +2.7 The higher capital expenditures were focused primarily thereof rental and leasing revenues 206 203 +3 +1.5 External revenues (€ million) 273 267 + 6 +2.2 on renovating existing stations. EBITDA adjusted (€ million) 217 227 –10 –4.4 The number of employees rose due to the increase in EBIT adjusted (€ million) 150 159 –9 –5.7 personnel in the areas of station maintenance, construction ROCE (%) 10.5 11.3 – – management, and facilities management. Development of Capital employed as of Jun 30 (€ million) 2,859 2,829 +30 +1.1 Net financial debt as of Jun 30 €( million) 1,215 1,175 +40 +3.4 business at Station Food GmbH, which was founded in the Redemption coverage 1) (%) 27.5 31.7 – – previous year, also had an impact. Gross capital expenditures (€ million) 253 182 +71 +39.0 Net capital expenditures (€ million) 80 69 +11 +15.9 | Employees as of Jun 30 (FTE) 5,404 5,007 +397 +7.9 ≈≈DB Netze Energy business unit

1) Change in method as of year-end 2016 [2016 INTEGRATED REPORT, PAGE 84 F.] retroactively adjusted. ≈≈ Events in the first half of 2017 Entry into retail business The quality of the facilities at passenger stations remained At the end of June, DB Netze Energy also began selling at a good level. electricity to private households. For more than a decade, The number of station stops rose slightly, mainly due we have been supplying industry, trade and commerce be­­ to increased schedule frequencies and additional traffic in yond the TOCs. By entering the retail business, DB Netze regional transport. In particular, the higher demand was Energy has taken the final step toward becoming a full- driven by non-Group railways. service provider. DB Netze Energy distributes only green The rise in revenues is attributable to higher station electricity that is certified with the ok-power label. revenues as a result of volume and prices as well as higher revenues from rental and leasing. The development of ex­­ ternal revenues reflects the growing market share of non- Group railways.

44 Development of business units

Nuclear fuel tax is unconstitutional The business processes and IT systems for access to the In a decision dated June 7, 2017, the German Federal Consti- traction current grid therefore continue to be readjusted in tutional Court ruled that the Nuclear Fuel Tax Act (Kern- close coordination with market partners and the Federal brennstoffsteuergesetz; KernbrStG) is void with retroactive Network Agency. effect, declaring that the Federal Government does not have legislative power to impose the tax. Overall, the Federal Development in the first half of 2017 Government has collected about € 6.3 billion from the ◊◊ EBIT lower due to elimination of one-off effect. nuclear fuel tax. In the absence of a valid legal basis, pay- ◊◊ Reduction in selling prices due to ments made must be refunded to operators. The Federal better purchasing conditions. Ministry of Finance (Bundesministerium der Finanzen; BMF) ◊◊ Expansion of the stationary energy business. already disbursed a partial amount to operators in June. DB Netze Energy received a repayment of about H 1 Change € 120 million and will refund to its customers the payments ¿ † DB Netze Energy 2017 2016 absolute % received in connection with the nuclear fuel tax. 1) Supply reliability (%) 99.99 99.99 – – Traction current Impact of the Nuclear Waste (16.7 Hz and direct current) (GWh) 4,283 4,378 –95 –2.2 Traction current pass-through Disposal Fund Act (16.7 Hz) (GWh) 999.6 755.4 +244.2 +32.3 In 2015, the Federal Government set up a commission to Stationary energy (50 Hz and 16.7 Hz) (GWh) 9,813 8,532 +1,281 +15.0 review financing for the phase-out of nuclear energy (Kom- Diesel fuel (million l) 218.1 217.7 + 0.4 + 0.2 mission zur Überprüfung der Finanzierung des Kernener- Total revenues (€ million) 1,416 1,391 +25 +1.8 gieausstiegs; KFK). The commission’s recommendations External revenues (€ million) 654 591 + 63 +10.7 were implemented by the Law on Restructuring Responsi- EBITDA adjusted (€ million) 79 98 –19 –19.4 EBIT adjusted (€ million) 44 63 –19 –30.2 bility for Nuclear Waste Disposal, which entered into force ROCE (%) 9.4 12.9 – – on June 16, 2017. Nuclear power plant operators (E.ON, Capital employed as of Jun 30 (€ million) 947 978 –31 –3.2 RWE, EnBW and Vattenfall) will continue to be responsible Net financial debt as of Jun 30 €( million) 445 254 +191 +75.2 for decommissioning and dismantling the plants. The Fed- Redemption coverage 2) (%) 24.7 41.8 – – eral Government is assuming responsibility for the interim Gross capital expenditures (€ million) 48 49 –1 –2.0 Net capital expenditures (€ million) 17 20 –3 –15.0 and final storage of radioactive waste and has established | Employees as of Jun 30 (FTE) 1,742 1,756 –14 –0.8 a public fund for this purpose. The nuclear power plant 1) Preliminary figures (not rounded). operators must transfer to this fund the provisions they 2) Change in method as of year-end 2016 [2016 INTEGRATED REPORT, PAGE 84 F.] have already set aside, plus a lump-sum risk premium of retroactively adjusted. about 35%. The high level of supply reliability was maintained. Because of its corporate shareholding in the Neckar- Sales of traction current declined. This was primarily due westheim nuclear power plant, DB AG had a payment obli- to lower demand from intra-Group customers, in particular gation of about € 400 million, which it has already satisfied. losses of tenders at DB Regional and energy-saving proj­ ects at DB Long-Distance. Access to traction current grid The traction current volumes passed through on behalf developed further of non-Group customers increased significantly due to the Back in 2014, DB Netze Energy became the firstRIC in switchover by some customers from full electricity supply to Europe to deregulate traction current supply completely, pass-through. In stationary energy, the sales volume for making it possible for TOCs to choose alternative energy non-Group customers continues to increase substantially. suppliers. Many TOCs avail themselves of this option. Lib- This is attributable both to an expansion of business with eralizing traction current supply requires introducing a existing industrial customers and an increase in volume in variety of new contractual relationships and business pro- the portfolio optimization segment. cesses which are largely automated and digital. In order to Demand for diesel fuels remained almost unchanged. allocate the traction units involved in the new change pro- cesses to the respective traction unit owners and traction unit users, to match them with the contractually selected electricity providers, and to handle the accounting and billing for the quantities of electric power consumed pre- cisely down to the minute, complex IT systems are required.

45 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Revenues increased slightly, driven by non-Group business. ◊◊ On behalf of the BMVI, DB E&C and its partners are Intra-Group revenues declined due to a slight decrease in jointly conducting a feasibility study on high-speed rail demand and reductions in selling prices in the traction cur- transport in India. rent segment. The increase in demand from non-Group ◊◊ The Al Haramain High-Speed project in Saudi Arabia, in customers in the area of stationary energy and from pass- which DB E&C plays a co-supporting role, is currently through compensated for this. being implemented. Beginning in 2018, trains will reach Other operating income decreased (–21.7%) due to the speeds of up to 320 km/h on the 450 km line between elimination of positive special items (provisions for decom- Mecca, Jeddah and Medina. missioning and disposing of waste at the Neckarwestheim ◊◊ DB E&C was commissioned to review the detailed joint venture power plant). design planning and the tender documents for the Cost of materials increased (+3.3%) because of the Taoyuan Metro’s new, 28-km green line in Taiwan. It will development in demand in the stationary energy business also provide support for construction, systems integra- and because of developments in the prices of mineral oil tion and commissioning. products. Personnel expenses increased (+3.4%) due to collective ≈≈ Development in the first half of 2017 bargaining agreements. ◊◊ Positive development of vehicle maintenance. Other operating expenses (–1.4%) remained virtually ◊◊ Factor cost increases burden development. unchanged. Depreciation was stable. H 1 Change Elimination of a one-off effect and a slightly dispropor- ¿ † Subsidiaries / other 2017 2016 absolute % tionate increase in expenses caused adjusted EBITDA and Total revenues (€ million) 2,154 2,058 +96 + 4.7 EBIT to deteriorate. External revenues (€ million) 234 246 –12 –4.9 Despite a decrease in capital employed, the significant EBITDA adjusted (€ million) –113 –152 +39 –25.7 decline in adjusted EBIT caused a noticeable deterioration EBIT adjusted (€ million) –235 –281 + 46 –16.4 Gross capital expenditures (€ million) 139 169 –30 –17.8 in ROCE. Special items arising from provisions for the Net capital expenditures (€ million) 139 169 –30 –17.8 decommissioning and disposal of waste at the joint venture | Employees as of Jun 30 (FTE) 51,291 50,986 +305 + 0.1 power plant, combined with the Waste Disposal Fund Act, were the main reasons behind the decrease in capital The area Subsidiaries/other encompasses the GOVERNANCE employed. FUNCTIONS AND THE DEPENDENT ADMINISTRATIVE SERVICE Net financial debt increased significantly because of UNITS [2016 INTEGRATED REPORT, PAGE 75] of the additions to provisions for the decommissioning and dis- DB AG. This segment also bundles the LEGALLY INDEPENDENT posal of waste at the joint venture power plant. As a result, ADMINISTRATIVE SERVICE UNITS [2016 INTEGRATED REPORT, PAGE 75] there was a noticeable decline in redemption coverage. and the INDEPENDENT OPERATING SERVICE UNITS [2016 INTE- Because of the completion of capital expenditure GRATED REPORT, PAGE 75], which provide services to several busi- projects in the previous year, in particular the Langenpro- ness units within DB Group. zelten Pumped Storage Station, net capital expenditures The increase in total revenues was mainly attributable decreased. to higher revenues generated with intra-Group customers, The number of employees was virtually unchanged. including in connection with IT and Engineering&Consult­ ­ing. The slightly lower revenues generated with non-Group ≈≈Subsidiaries/others customers had a dampening effect. The increase in adjusted EBITDA and adjusted EBIT ≈≈ Events in the first half of 2017 was caused, in part, by the improved order situation at the High demand for consulting services service companies and the elimination of negative one-o ff DB Engineering&Consulting (DB E&C) further expanded effects in the first half of 2016 in the vehicle maintenance its business in the first half of 2017, opening new locations segment. In addition, the change in reporting method for in several countries, including China and Australia. In view restructuring expenses for the Group-wide labor market of the growing demand, in the future DB E&C will further and higher income from compensation for damage led to strengthen its capabilities by adding more specialists, espe- an improvement in adjusted EBIT, despite factor cost cially in the Middle East and India. increases.

46 DEVELOPMENT OF BUSINESS UNITS / Additional information

Additional information

Various tenders related to Vehicle orders due to new Cyber Security @ DB to improve infrastructure projects transport contracts IT security and governance

≈≈Significant contract awards ◊◊ A contract with a total value of about € 300 million for (including framework contracts) the production of a total of 39 electric multiple units for the network 4 “Rhine Valley” was awarded. ◊◊ Framework contracts for the biggest projects in civil ◊◊ Contracts to produce 26 electric multiple units for the engineering maintenance services across Germany have lines RE 8 (Koblenz – Mönchengladbach) and RB 33 been concluded for the next four years (total volume: (Essen – Aachen/Heinsberg) with a value totaling about about € 100 million). € 161 million were awarded. ◊◊ For the disposal of about 6 million tons of gravel and ◊◊ A contract with a value of about € 153 million for the soil, framework contracts amounting to about € 90 mil- production of a total of 27 electric multiple units for the lion per year were concluded nationwide. Nuremberg S-Bahn (metro) network was awarded. ◊◊ The existing spare parts contracts for the maintenance ◊◊ A contract with a value of about € 142 million for the of signal towers were extended through the end of 2017 production of a total of 25 electric multiple units for the (total volume: about € 75 million). E-network Saar RB was awarded. ◊◊ In order to ensure supply reliability in the small-scale business of surveying engineers, a nationwide frame- ≈≈ General requirements and services work contract for “surveying services” with a call-off ◊◊ DB Group is shifting to Microsoftʼs cloud-based Office volume of about € 60 million was concluded with 21 sur- 365 solution. A contract with a volume of € 110 million veying offices. has been concluded for a period of five years. ◊◊ A framework contract through 2018 was concluded for ◊◊ A nationwide contract for maintenance services and spare signal-guided line equipment with ETCS (L1LS) (total parts was concluded for about 3,600 elevators and esca- volume: about € 60 million). lators. The contract term is a maximum of eight years ◊◊ A framework contract for geotechnical services was with four suppliers (total volume of about € 59 million). concluded for the performance of short-term geotech- nical inquiries (total volume of about € 40 million). ≈≈Other topics ◊◊ A framework contract for track planning services has been concluded for four years (total volume: about ≈≈ Claims against truck cartel € 40 million). DB Group is reviewing claims against the truck cartel. From ◊◊ As part of the expansion and electrification of the Knap- 1997 to 2011, the manufacturers DAF, Daimler, Iveco, MAN, penrode – Horka – German/Polish border line, a contract Scania and Volvo/Renault formed a cartel and colluded on of about € 37 million was awarded for the Section BA prices, among other things. 2.3, Niesky – Horka. ◊◊ The start of construction of the Homburger Damm dou- ≈≈ WannaCry cyber attack ble-track line (structural engineering part 1, a contract According to Europol, at least 200,000 computer systems volume of about € 15 million) marks the beginning of in 150 countries were victims of the global cyber attack the larger “Rhine Main+” project with a volume of about WannaCry on May 12, 2017 – this included DB Group. At € 12 billion. The project is one of the BIM pilot projects. DB Group, the attack mainly affected ticket machines and display boards in stations. Train traffic and the security of ≈≈ Rolling stock and rolling customers and customer data were never at risk. Immedi- stock spare parts ately after the occurrence of WannaCry, a crisis committee ◊◊ As part of the long-distance transport offensive, a con- was set up to correct the technical failures and prevent it tract for the production of 25 IC 2 trains was awarded. from continuing to spread. The Cyber Security @ DB project aims to improve IT security and governance throughout DB Group.

47 !!!

Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

Opportunity and risk report

No material changes Risks for EBIT development Risk portfolio unchanged in opportunity and risk in 2017 unchanged without any risks to DB Group management as a going concern

Our business activities are associated with risks as well as areas of economic climate, market and competition in the opportunities. Our business policy therefore aims to take amount of € 0.1 billion (thereof very likely (vl): € 0.0 billion). advantage of opportunities through our opportunity man- Compared to the estimate in the 2016 Integrated Report, agement system, while also actively managing those risks the overall opportunity position is unchanged at € 0.1 bil- identified within the framework of our risk management lion. Opportunities exist mostly in the areas of economic system. There were no significant changes to DB Group’s climate, market and competition, as well as production and RISK MANAGEMENT SYSTEM [2016 INTEGRATED REPORT, PAGE 180 FF.] technology in the amount of € 0.1 billion (thereof vl: in the first half of 2017. Nor were there any significant € 0.0 billion). changes to DB Group’s MAJOR OPPORTUNITIES AND RISKS [2016 Overall, this results in a balanced opportunity and risk INTEGRATED REPORT, PAGE 182 FF.]. profile for the 2017 financial year. The opportunities and risks analysis was performed Our analyses of risks, countermeasures, hedging and pre­ compared to the anticipated DEVELOPMENT OF DB GROUP IN ­­cautionary measures, together with the opinion of the Group FULL-YEAR 2017 [PAGE 50]. Management Board based on the current risk assessment Compared to the estimate in the 2016 Integrated Re­­ and our medium-term planning (MTP), indicate that there port, the overall risk position is unchanged at € 0.1 billion. are no risks that, individually or jointly, could have an impact The remaining risks in the EBIT forecast are mostly in the on the asset, financial and profit situation of DB Group and would pose a threat to the Group as a going concern.

Events after the balance sheet date

Additional bond issued “Smart City” partnership DB Arriva wins transport agreed with the contract city of Hamburg

≈≈Fourth bond issued in 2017 ≈≈Approval of Act on Collective Agreement Unity On July 11, 2017, we issued a privately placed bond through DB Finance with a total volume of SEK 530 million (about On July 11, 2017, the German Federal Constitutional Court € 55 million) (maturity: 15 years; coupon of 2.2%) and dismissed most of the complaints filed by several trade swapped it to euros. unions against the Act on Collective Agreement Unity. The act stipulates that, in the case of competing collective ≈≈Hamburg on its way to becoming bargaining agreements in a company, only the agreement a Smart City with the with the most members is binding. On July 10, 2017, we signed an agreement with Hamburg on ≈≈Success in the Netherlands a “Smart City” partnership. The aim is to use new technol- ogies and innovative ideas (for example, on-demand shut- In July 2017, DB Arriva won the open competition tender and tles, smart lockers, cargo bikes and co-working spaces) to will operate the regional rail services in Groningen and make public transport, stations and city logistics more con- Friesland for another 15 years. The contract, which com- venient and environmentally friendly for residents. mences in December 2020, has a revenue volume of € 1.6 bil- lion and contains cross-border traffic to Lower Saxony.

48 OPPORTUNITY AND RISK REPORT / EVENTS AFTER THE BALANCE SHEET DATE / Outlook

Outlook

Improved expectations for Market development better Outlook for key financial economic development than expected in freight figures raised transport and logistics

≈≈Future direction of DB Group ≈≈Positive expectations for relevant markets The future direction of DB Group is described in the 2016 INTEGRATED REPORT [PAGE 190]. There were no significant ≈≈ Passenger transport changes to this in the first half of 2017. 2017 2017 (Mar fore- (Jul fore- ≈≈Positive development in Anticipated market development [%] 2016 cast) cast) the economic outlook German passenger transport market (based on pkm) +1.7 ~+1.0 +1.0 The data for 2016 are based on the information and estimates available as of July 2017. Expectations for 2017 are rounded off to the nearest half percentage point. 2017 2017 (Mar fore- (Jul fore- For the German passenger transport market, a moderate Anticipated development [%] 2016 cast) cast) increase in transport performance is forecast for 2017, GDP World +2.3 ~+2.5 ~+3.0 below the level of the previous year. World trade 1) +1.7 ~+3.0 ~+5.0 GDP Eurozone +1.7 ~+1.5 ~+2.0 A continued increase in transport performance is also GDP Germany +1.8 ~+1.5 ~+2.0 expected for the European passenger transport market. 1) Trade in goods only. The positive general framework resulting from the con- The data for 2016, adjusted for price and calendar effects, is based on tinued rise in employment figures and disposable income the information and estimates available as of July 2017. Expectations for 2017 are rounded off to the nearest half percentage point. will remain in place, but the momentum is expected to Source: Oxford Economics. weaken due to Brexit and rising fuel prices and inflation. Forecasts for economic development in 2017 are based on Based on this, above-average growth is expected for rail the assumption of general stability in the geopolitical situ- passenger transport across Europe. ation. We have adjusted our forecasts for the economic development upward for the full-year 2017 based on the ≈≈ Freight transport and logistics current good development compared to the 2016 Inte- grated Report. This applies in particular to world trade, 2017 2017 (Mar fore- (Jul fore- even if growth is expected to weaken somewhat towards Anticipated market development [%] 2016 cast) cast) the end of the year. German freight transport (based on tkm) ~+1.9 ~+1.5 ~+2.0 The eurozone is also benefiting from increased export European rail freight transport (based on tkm) ~+1.1 ~+1.0 >+1.0 demand, especially from the emerging markets and Asia. European land transport (based on revenues) +2.0 +3.0 +3.0 Global air freight (based on t) +2.0 +2.0 +5.0 In addition, the continued very low interest rates and low Global ocean freight (based on TEU) +1.3 +2.0 +3.5 inflation are having a positive effect on demand. For these Global contract logistics (based on revenues) +4.2 + 4.0 + 4.0 reasons, we assume that the upward trend will continue in The data for 2016 are based on the information and estimates available as of June 2017. the full-year 2017. Expectations for 2017 are rounded off to the nearest half percentage point. The growth of the German economy is expected to remain slightly above the eurozone average. This expecta- The outlook for the German freight transport market has tion is due to an increase in new orders and a further improved slightly: improvement in consumer confidence. ◊◊ Given the continued high intensity of intermodal com- petition and the weaker boost from the steel industry assumed during the second half of the year and the negative effects of the closure/conversion of coal power plants, 2017 is expected to see only a moderate increase in performance for rail freight transport, which is some- what below previous expectations.

49 Deutsche Bahn Group – Interim Report January – June 2017 INTERIM GROUP MANAGEMENT REPORT

◊◊ After the strong rise in the first half of 2017, truck traffic ≈≈ Financial markets will continue to record above-average development and The stable development of the financial markets should to grow more dynamically than previously expected, continue in the second half of 2017. The expectations of the given the positive economic conditions. financial market players with regard to the prospects for ◊◊ Inland waterway transport is headed for a decline for the global economy have improved appreciably since the the fourth year in a row and will not return to moderate end of 2016. This trend is likely to continue through the end growth, as assumed at the beginning of the year. of the year. The improvement in the economic environment For the European rail freight transport market, the increase has resulted in a shift from investment capital to stock mar- in volume sold in 2017 is expected to be slightly stronger kets. This development is likely to continue during the rest than previously forecast. In particular, in the segments that of the year. It is supported by higher inflation rates in large are most relevant for rail transport, the partly considerably industrialized countries, which strengthen the relative improved economic momentum is having a positive effect attractiveness of the stock markets in comparison to other on the development of demand. options, such as bond markets. For the above reasons, the The positive development of demand in European land rise in bond yields observed in the past few months is not transport in the first half of 2017 is expected to continue expected to be a temporary development, but the conse- unchanged in the second half of the year. Given the per- quence of a continuing normalization of the economic envi- sistently positive volume development, a slight increase in ronment. At the same time, the demand for bonds with the price level can be expected. good credit ratings remains high by historical comparison. Due to the strong volume development so far and an In particular, the ongoing geopolitical uncertainty is likely expected positive volume development in the second half to counteract an excessive decline in prices in the bond of the year, the air freight market is likely to develop sig- sector later in the year. nificantly more positively than previously expected. In the global ocean freight market, the expectations for ≈≈Development of DB Group the second half of the year have improved, and a much more positive volume development is expected for 2017 as ≈≈ Profitable quality leader a whole. A very dynamic development is still expected for the 2017 2017 (Mar fore- (Jul fore- contract logistics market. ¿ Anticipated development of DB Group 2016 cast) cast)

Volume sold rail passenger transport (Germany) ~ ~ ≈≈ Infrastructure (million pkm) 80,219 +1.5 % +2.0 % Volume sold rail freight transport (million tkm) 94,698 ~–0.6% ~+ 0.0 % For full-year 2017, we expect this to continue at the current Train kilometers on track infrastructure level. (million train-path km) 1,068 ~–0.7 % ~+ 0.5 % ~ In terms of station stops, we expect a slight increase in Shipments in European land transport (thousand) 99,638 +5–6% +1.0 % Air freight volume (export) (thousand t) 1,179 ~+3.0 % ~+3.0 % the year-on-year comparison. The share of train stops oper- Ocean freight volume (export) (thousand TEU) 2,006 ~+2.0 % ~+3.0 % ated by non-Group railways will continue to increase. Customer satisfaction – passengers (SI) 76.0 ~77 ~77 Leasing income in stations will also show positive devel- Punctuality DB Group (rail) in Germany (%) 94.3 ~95.0 ~95.0 opment and be slightly over the level of the previous year thereof punctuality DB Long Distance (%) 78.9 81 81

Revenues (€ billion) 40.6 > 41.5 > 42.5 (+1.3%). EBIT adjusted (€ billion) 1.9 ≥ 2.1 ≥ 2.2 ROCE (%) 5.9 ≥ 6.0 > 6.0 ≈≈ Procurement markets Redemption coverage (%) 18.1 ≥ 18.5 > 18.5 We continue to expect no bottlenecks in procurement. Due to the oversupply in the oil market, no significant increase On the basis of the developments to date and the current in the oil price is expected in the foreseeable future. In estimates for the second half of 2017, we have made adjust- Germany, there will continue to be struggles over the design ments to our expectations: of the new electricity market (Electricity Market 2.0). Short- ◊◊ We now expect volume sold in rail freight transport to term price increases are likely to be amplified by the further be somewhat more positive. expansion of renewable energies due to the limited ability ◊◊ Based on the development in the first half, the train kilo­ to forecast them. Wholesale prices are being boosted by ­­meters in track infrastructure should increase for full- the dismantling of conventional capacities. year 2017 as well.

50 Outlook

◊◊ The increase in European land transport shipment Anticipated financial position volume is likely to be weaker due to the development of the parcel business. 2017 2017 (Mar fore- (Jul fore- ◊◊ In ocean freight, we now expect the development to be Æ Anticipated development [€ billion] 2016 cast) cast)

somewhat stronger in full-year 2017 as well. Maturities 2.3 2.1 2.1 ◊◊ Revenues and operating profits should develop better Bond issues 2.1 < 2.0 < 2.0 ~ ~ than previously expected due to the strong develop- Cash and cash equivalents as of Dec 31 4.5 3.5 3.5 Net financial debt as of Dec 31 17.6 < 19.0 < 19.0 ment in the first half. ◊◊ The more positive development should also have an impact on the ROCE and the redemption coverage. Our expectations regarding the financial position for full- year 2017 are unchanged from the forecast in the 2016 Inte- Business units grated Report.

Revenues adjusted EBIT adjusted ≈≈ Top employer

2017 2017 2017 2017 (Mar (Jul (Mar (Jul 2017 2017 Æ Anticipated fore- fore- fore- fore- (Mar fore- (Jul fore- development [€ million] 2016 cast) cast) 2016 cast) cast) † Anticipated development 2016 cast) cast)

DB Long-Distance 4,159 q q 173 q q Employee satisfaction (SI) 3.7 – – DB Regional 8,653 e e 636 q w Employer attractiveness (rank in Germany) 16 ≤ 16 ≤ 16 DB Cargo 4,560 e e –81 q q DB Netze Track 5,228 q q 561 q q On the basis of the developments to date in the 2017 finan- DB Netze Stations 1,233 q q 221 q e DB Netze Energy 2,779 w w 126 w w cial year and the current estimates for the second half of DB Arriva 5,093 q q 280 q q 2017, we have made no adjustments to our expectations for DB Schenker 15,128 q q 410 q q the SOCIAL † dimension. q above previous year’s figure e at previous yearʼs level w below previous yearʼs figure ≈≈ Eco-pioneer

At the business unit level, our expectations are virtually 2017 2017 (Mar fore- (Jul fore- unchanged. Based on the development in the first half of ¥ Anticipated development 2016 cast) cast)

2017, we now expect the development of operating profit SpecificCO ₂e emissions (carriers) compared to 2006 (%) –27.5 –28 –28 at DB Regional and DB Netze Stations to be weaker than Share of renewable energies in the it has been thus far. DB traction current mix (%) 42 44 44 Track kilometers noise remediated in total (rounded) as of Dec 31 (km) 1,600 1) 1,700 1,700 Anticipated capital expenditures Quiet freight cars in Germany as of Dec 31 32,396 ~39,000 ~39,000

1) Preliminary figure. 2017 2017 (Mar fore- (Jul fore- Æ Anticipated development [€ billion] 2016 cast) cast) On the basis of the developments to date in the 2017 finan-

Gross capital expenditures 9.5 ≥ 10.5 > 10.5 cial year and the current estimates for the second half of Net capital expenditures 3.3 ≥ 3.5 ~4.0 2017, we have made no adjustments to our expectations for the ENVIRONMENTAL ¥ dimension. We will continue our modernization course in the 2017 financial year with a high level of capital expenditures. In FORWARD-LOOKING STATEMENTS any case, based on the current estimates, we expect capital This management report contains statements and forecasts pertaining to the future expenditures to be somewhat higher than forecast at the development of DB Group, its business units and individual companies. These forecasts beginning of 2017. are estimates made based on information that was available at the current time. Actual developments and profits may diverge from the current expectations as a result of the non-materialization of the assumptions upon which our forecasts are based or the materialization of risks such as those presented in the Risk report. DB Group does not assume any obligation to update the statements made within this management report.

51 Deutsche Bahn Group – Interim Report January – June 2017 CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Consolidated interim financial statements (unaudited)

Consolidated statement of income

H 1

Æ [€ million] 2017 2016 2016 Revenues 21,066 20,033 40,557 Inventory changes and internally produced and capitalized assets 1,376 1,254 2,741 Overall performance 22,442 21,287 43,298 Other operating income 1,239 1,108 2,834 Cost of materials –10,411 –9,564 –20,101 Personnel expenses –8,227 –7,789 –15,876 Depreciation and impairments –1,405 –1,457 –3,017 Other operating expenses –2,562 –2,632 –5,677 Operating profit EBIT( ) 1,076 953 1,461 Result from investments accounted for using the equity method 14 17 33 Net interest income –343 –396 –772 Other financial result –14 –11 –16 Financial result –343 –390 –755 Profit before taxes on income 733 563 706 Taxes on income 46 40 10 Net profit (after taxes) 779 603 716

Net profit attributable to Shareholder of Deutsche Bahn AG 766 591 695 Minority interests 13 12 21

Earnings per share (€ per share) undiluted 1.78 1.37 1.62 diluted 1.78 1.37 1.62

≈≈ Reconciliation of consolidated comprehensive income

H 1

Æ [€ million] 2017 2016 2016 Net profit (after taxes) 779 603 716

Changes due to the revaluation of defined benefit plans 670 –1,323 –822 Changes in profit items recognized directly in equity which are not reclassified to the income statement 670 –1,323 –822 Changes resulting from currency translation –93 –64 –52 Changes resulting from market valuation of securities –1 3 –1 Changes resulting from market valuation of cash flow hedges –32 188 262 Share of profit items not recognized in the income statement due to investments accounted for using the equity method – – 0 Changes in profit items recognized directly in equity which are reclassified to the income statement –126 127 209 Balance of profit items covered directly in equity (before taxes) 544 –1,196 – 613 Revaluation of defined benefit plans –17 101 108 Changes in deferred taxes on profit items recognized directly in equity, which are not reclassified to the income statement –17 101 108 Deferred taxes relating to the change in the market valuation of securities – – 1 Deferred taxes relating to the change in the market valuation of cash flow hedges 9 –22 –34 Changes in deferred taxes on profit items recognized directly in equity, which are reclassified to the income statement 9 –22 –33 Balance of profit items recognized directly in equity (after taxes) 536 –1,117 –538 Comprehensive income 1,315 –514 178 Comprehensive income attributable to Shareholder of Deutsche Bahn AG 1,305 –524 159 Minority interests 10 10 19

52 CONSOLIDATED STATEMENT OF INCOME / CONSOLIDATED BALANCE SHEET

Consolidated balance sheet ≈≈ Assets

Æ [€ million] Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 NON-CURRENT ASSETS Property, plant and equipment 38,941 38,884 38,843 Intangible assets 3,567 3,682 3,560 Investments accounted for using the equity method 537 534 534 Available-for-sale financial assets 38 12 12 Receivables and other assets 668 627 223 Derivative financial instruments 255 339 350 Deferred tax assets 1,647 1,511 1,506 45,653 45,589 45,028 CURRENT ASSETS Inventories 1,175 1,062 1,056 Available-for-sale financial assets 1 1 1 Trade receivables 4,366 3,974 4,212 Other receivables and other assets 1,912 1,433 1,379 Income tax receivables 45 54 57 Derivative financial instruments 44 60 69 Cash and cash equivalents 2,906 4,450 3,717 Held-for-sale assets 0 0 0 10,449 11,034 10,491 Total assets 56,102 56,623 55,519

≈≈ Equity and liabilities

Æ [€ million] Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 EQUITY Subscribed capital 2,150 2,150 2,150 Reserves 3,927 3,388 2,809 Retained earnings 7,187 7,022 6,925 Equity attributable to shareholder of Deutsche Bahn AG 13,264 12,560 11,884 Minority interests 182 184 176 13,446 12,744 12,060 NON-CURRENT LIABILITIES Financial debt 18,398 20,042 19,489 Other liabilities 220 252 392 Derivative financial instruments 312 282 301 Pension obligations 3,947 4,510 4,895 Other provisions 2,267 2,362 2,491 Deferred items 1,043 1,131 1,018 Deferred tax liabilities 153 130 138 26,340 28,709 28,724 CURRENT LIABILITIES Financial debt 3,829 2,439 2,766 Trade liabilities 5,204 5,100 4,467 Other liabilities 3,471 3,511 3,651 Income tax liabilities 158 150 174 Derivative financial instruments 63 37 103 Other provisions 2,672 2,972 2,729 Deferred items 919 961 845 16,316 15,170 14,735 Total assets 56,102 56,623 55,519

53 Deutsche Bahn Group – Interim Report January – June 2017 CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Consolidated statement of cash flows

H 1

Æ [€ million] 2017 2016 2016 Profit before taxes on income 733 563 706 Depreciation on property, plant and equipment and intangible assets 1,405 1,457 3,017 Write-ups/write-downs on non-current financial assets – 0 2 Result on disposal of property, plant and equipment and intangible assets –38 –30 –89 Result on disposal of financial assets 0 0 5 Interest and dividend income –41 –23 –42 Interest expense 384 420 813 Foreign currency result 9 1 –6 Result of investments accounted for using the equity method –14 –17 –33 Other non-cash expenses and income 512 275 1,252 Changes in inventories, receivables and other assets –967 –696 –900 Changes in liabilities, provisions and deferred items –861 –40 –333 Cash generated from operating activities 1,122 1,910 4,392 Interest received 28 13 25 Received/paid (–) dividends and capital distribution 0 0 –8 Interest paid –324 –321 –594 Paid (–)/reimbursed (+) taxes on income –64 –79 –167 Cash flow from operating activities 762 1,523 3,648

Proceeds from the disposal of property, plant and equipment and intangible assets 120 107 355 Payments for capital expenditures in property, plant and equipment and intangible assets –4,149 –3,507 –9,115 Proceeds from investment grants 2,618 2,126 6,190 Payments for repaid investment grants –56 –27 –53 Proceeds from sale of financial assets 0 0 0 Payments for investments in financial assets –25 0 0 Proceeds from sale of shares in consolidated companies less net cash and cash equivalents sold 2 0 0 Payments for acquisition of shares in consolidated companies less net cash and cash equivalents acquired as well as payments for party of companies –7 –9 –42 Proceeds from disposal of investments accounted for using the equity method 1 0 0 Payments for additions of investments accounted for using the equity method 0 0 0 Cash flow from investing activities –1,496 –1,310 –2,665

Distribution of profits to shareholder –600 –850 –850 Distribution of profits to minority interests –10 –11 –13 Payments for finance lease transactions –34 –68 –201 Proceeds from issue of bonds 576 494 2,117 Payments for redemption of bonds –500 –500 –1,542 Payments for the redemption and repayment of interest-free loans –206 –220 –220 Proceeds from borrowings and commercial paper 16 159 90 Payments for the redemption of borrowings and commercial paper –15 –3 –410 Cash flow from financing activities –773 –999 –1,029

Net changes in cash and cash equivalents –1,507 –786 –46 Cash and cash equivalents as of Jan 1 4,450 4,549 4,549 Changes in cash and cash equivalents due to changes in exchange rates –37 –46 –53 Cash and cash equivalents as of Jun 30/Dec 31 2,906 3,717 4,450

54 CONSOLIDATED STATEMENT OF CASH FLOWS / CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Consolidated statement of changes in equity

Reserves Equity attribut- Fair value able to Fair value valuation share- Sub- Currency valuation of cash Revalua- Other holder of scribed Capital trans- of secu-­ flow tion of move- Retained Deutsche Minority Equity Æ [€ million] capital reserves lation rities hedges pensions ments Total earnings Bahn AG interests As of Jan 1, 2016 2,150 5,310 199 0 –396 –1,177 –12 3,924 7,185 13,259 186 13,445 Capital increase – – – – – – – – – – 4 4 Capital decrease – – – – – – – – – – –1 –1 Dividend payment – – – – – – – – –850 –850 –11 –861 Other changes – – – – – – – – –1 –1 –12 –13 Comprehensive income – – –63 3 166 –1,221 – –1,115 591 –524 10 –514 thereof net profit – – – – – – – – 591 591 12 603 thereof currency effects – – –63 – – – – –63 – –63 –1 – 64 thereof deferred taxes – – – – –22 101 – 79 – 79 – 79 thereof market valuation – – – 3 188 – – 191 – 191 – 191 thereof revaluation of defined benefit plans – – – – – –1,322 – –1,322 – –1,322 –1 –1,323 thereof share of items not recognized in the income statement from invest- ments accounted for using the equity method – – – – – – – – – – – – As of Jun 30, 2016 2,150 5,310 136 3 –230 –2,398 –12 2,809 6,925 11,884 176 12,060

Reserves Equity Fair attribut- Fair value able value valuation to share- Sub- Currency valuation of cash Revalua- Other holder of scribed Capital trans- of secu-­ flow tion of move- Retained Deutsche Minority Æ [€ million] capital reserves lation rities hedges pensions ments Total earnings Bahn AG interests Equity As of Jan 1, 2017 2,150 5,310 149 0 –168 –1,891 –12 3,388 7,022 12,560 184 12,744 Capital increase – – – – – – – – – – 1 1 Capital decrease – – – – – – – – – – –3 –3 Dividend payment – – – – – – – – –600 –600 –10 – 610 Other changes – – – – – – 0 0 –1 –1 – –1 Comprehensive income – – –90 –1 –23 653 – 539 766 1,305 10 1,315 thereof net profit – – – – – – – – 766 766 13 779 thereof currency effects – – –90 0 – – – –90 – –90 –3 –93 thereof deferred taxes – – – – 9 –17 – –8 – –8 – –8 thereof market valuation – – – –1 –32 – – –33 – –33 – –33 thereof revaluation of defined benefit plans – – – – – 670 – 670 – 670 – 670 thereof share of items not recognized in the income statement from invest- ments accounted for using the equity method – – – – – – – – – – – – As of Jun 30, 2017 2,150 5,310 59 –1 –191 –1,238 –12 3,927 7,187 13,264 182 13,446

55 Deutsche Bahn Group – Interim Report January – June 2017 CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Segment information according to segments

DB Netze DB Netze DB Netze Subsidiaries/ Sum of DB Group DB Long-Distance DB Regional DB Arriva DB Cargo DB Schenker Track Stations Energy Other 1) segments Consolidation adjusted Reconciliation 2) DB Group

Æ Jan 1 to Jun 30 or respectively as of Jun 30 [€ million] 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 External revenues 2,028 1,932 4,254 4,223 2,659 2,526 2,150 2,154 8,072 7,400 746 694 273 267 654 591 234 246 21,070 20,033 – – 21,070 20,033 –4 0 21,066 20,033 Internal revenues 79 74 50 57 3 3 156 158 31 31 1,906 1,907 362 356 762 800 1,920 1,812 5,269 5,198 –5,269 –5,198 – – – – – – Total revenues 2,107 2,006 4,304 4,280 2,662 2,529 2,306 2,312 8,103 7,431 2,652 2,601 635 623 1,416 1,391 2,154 2,058 26,339 25,231 –5,269 –5,198 21,070 20,033 –4 – 21,066 20,033 Other external income 69 80 102 128 129 87 108 114 97 89 323 325 62 50 107 9 235 225 1,232 1,107 – – 1,232 1,107 7 1 1,239 1,108 Other internal income 53 27 89 41 0 2 49 21 3 3 107 91 9 8 –88 14 492 528 714 735 –714 –735 – – – – – – Changes in inventories and internally produced and capitalized assets 7 2 32 32 0 1 16 23 2 4 415 388 19 17 9 9 433 394 933 870 443 384 1,376 1,254 – – 1,376 1,254 Total income 2,236 2,115 4,527 4,481 2,791 2,619 2,479 2,470 8,205 7,527 3,497 3,405 725 698 1,444 1,423 3,314 3,205 29,218 27,943 –5,540 –5,549 23,678 22,394 3 1 23,681 22,395 Cost of materials –1,200 –1,235 –2,660 –2,617 –837 –731 –1,259 –1,243 –5,339 –4,782 –834 –812 –257 –239 –1,235 –1,196 –1,266 –1,210 –14,887 –14,065 4,491 4,505 –10,396 –9,560 –15 –4 –10,411 –9,564 Personnel expenses –470 –457 –966 –937 –1,215 –1,077 –818 –830 –1,580 –1,505 –1,358 –1,275 –154 –139 –60 –58 –1,528 –1,507 –8,149 –7,785 1 –3 –8,148 –7,788 –79 –1 –8,227 –7,789 Other operating expenses –238 –239 –267 –276 –501 –579 –320 –358 –981 –946 –490 –480 –97 –93 –70 –71 –633 –640 –3,597 –3,682 1,037 1,051 –2,560 –2,631 –2 –1 –2,562 –2,632 EBITDA 328 184 634 651 238 232 82 39 305 294 815 838 217 227 79 98 –113 –152 2,585 2,411 –11 4 2,574 2,415 –93 –5 2,481 2,410 Scheduled depreciation 3) –112 –130 –319 –316 –128 –126 –104 –92 –97 –94 –426 –444 –67 –68 –35 –35 –122 –129 –1,410 –1,434 22 23 –1,388 –1,411 –38 –49 –1,426 –1,460 Impairment losses recognized/reversed 3) 0 0 –1 –1 0 0 –6 0 0 0 0 4 0 0 0 0 0 0 –7 3 – – –7 3 28 – 21 3 EBIT (operating profit) 216 54 314 334 110 106 –28 –53 208 200 389 398 150 159 44 63 –235 –281 1,168 980 11 27 1,179 1,007 –103 –54 1,076 953 Net operating interest 4) 5 –1 –21 –27 –14 –15 –24 –30 –18 –18 –139 –127 –20 –19 –7 –8 –94 –128 –332 –373 – – –332 –373 – – – – Operating income after interest 4) 221 53 293 307 96 91 –52 –83 190 182 250 271 130 140 37 55 –329 –409 836 607 11 27 847 634 – – – –

Property, plant and equipment 2,117 1,879 6,586 6,594 2,128 2,049 2,224 2,237 1,415 1,435 19,837 20,132 3,201 3,210 972 1,002 1,150 982 39,630 39,520 –689 –677 38,941 38,843 – – 38,941 38,843 Intangible assets 6 1 19 17 1,719 1,809 131 1 1,434 1,484 133 134 8 4 35 55 69 55 3,554 3,560 13 – 3,567 3,560 – – 3,567 3,560 thereof goodwill 0 0 4 6 1,388 1,436 – 0 1,135 1,188 – 0 0 0 – 0 14 13 2,541 2,643 22 – 2,563 2,643 – – 2,563 2,643 Inventories 82 77 168 163 92 86 95 88 69 64 176 161 0 – 39 18 488 417 1,209 1,074 –34 –18 1,175 1,056 – – 1,175 1,056 Trade receivables 222 258 630 566 333 322 577 551 2,335 2,325 321 316 50 26 158 293 636 674 5,262 5,331 –896 –1,119 4,366 4,212 – – 4,366 4,212 Receivables and other assets 1,071 1,055 321 375 959 495 94 112 828 1,102 183 52 13 13 26 98 19,516 17,613 23,011 20,915 –20,431 –19,313 2,580 1,602 – – 2,580 1,602 Receivables from financing –1,017 –1,043 –49 –175 –224 –133 –6 –19 –271 –638 –1 –2 0 – 160 –52 –18,797 –16,968 –20,205 –19,030 20,066 18,929 –139 –101 – – –139 –101 Income tax receivables – – 0 0 19 20 2 2 16 26 0 0 – – 0 – 8 9 45 57 – – 45 57 – – 45 57 Available-for-sale assets – – – – – – 0 0 – – – – – – – – – – 0 0 – – 0 0 – – 0 0 Trade liabilities –245 –254 –593 –718 –530 –446 –491 –534 –1,905 –1,749 –1,084 –663 –98 –98 –286 –284 –857 –831 – 6,089 –5,577 885 1,110 –5,204 –4,467 – – –5,204 –4,467 Miscellaneous and other liabilities –309 –262 –383 –472 –411 –519 –399 –374 –853 –765 –694 –997 –122 –129 –88 –131 –804 –786 –4,063 –4,435 372 392 –3,691 –4,043 – – –3,691 –4,043 Income tax liabilities 0 – 0 0 –83 –87 –4 –5 –72 –73 – – –1 –1 – – –18 –36 –178 –202 20 28 –158 –174 – – –158 –174 Other provisions –66 –73 –1,233 –1,241 –155 –180 –284 –171 –381 –461 –356 –366 –55 –53 –66 –17 –2,322 –2,614 –4,918 –5,176 –21 –44 –4,939 –5,220 – – –4,939 –5,220 Deferred items –392 –357 –142 –131 –406 –206 –7 –8 –17 –15 –735 –878 –137 –143 –3 –4 –124 –122 –1,963 –1,864 1 1 –1,962 –1,863 – – –1,962 –1,863 Capital employed 5) 1,469 1,281 5,324 4,978 3,441 3,210 1,932 1,880 2,598 2,735 17,780 17,889 2,859 2,829 947 978 –1,055 –1,607 35,295 34,173 –714 –711 34,581 33,462 – – 34,581 33,462

Net financial debt –1,020 –1,034 2,671 2,462 886 574 1,410 1,433 917 180 10,092 10,224 1,215 1,175 445 254 2,414 2,891 19,030 18,159 – – 19,030 18,159 – – 19,030 18,159

Investments accounted for using the equity method 0 0 4 5 141 133 27 27 13 15 1 1 – – 0 – 351 353 537 534 – – 537 534 – – 537 534 Result from investments accounted for using the equity method 0 0 0 1 9 12 1 1 1 0 0 0 – – – – 3 3 14 17 – – 14 17 – – 14 17

Gross capital expenditures 215 156 164 137 184 127 110 52 76 72 2,907 2,495 253 182 48 49 139 169 4,096 3,439 12 33 4,108 3,472 – – 4,108 3,472 Investment grants received – – –30 –2 – 0 –2 –2 – – –2,382 –1,980 –173 –113 –31 –29 0 0 –2,618 –2,126 – – –2,618 –2,126 – – –2,618 –2,126 Net capital expenditures 215 156 134 135 184 127 108 50 76 72 525 515 80 69 17 20 139 169 1,478 1,313 12 33 1,490 1,346 – – 1,490 1,346 Additions due to changes in the scope of consolidation 0 – – – 4 – – – 0 17 – – – – – – – – 4 17 – – 4 17 – – 4 17

Employees 6) 16,301 16,443 35,631 35,957 54,145 51,618 28,964 30,155 69,370 66,822 44,717 43,948 5,404 5,007 1,742 1,756 51,291 50,986 307,565 302,692 – – 307,565 302,692 – – 307,565 302,692

1) Previous year’s figures adjusted due to the separation of DB Netze Energy. 2) Relating to special items and reclassification PPA amortization of customer contracts.. 3) The non-cash items are included in the segment result shown. 4) Key figure from internal reporting, no external figures. 5) Profit transfer agreements were not assigned to segment assets or liabilities. 6) The number of employees comprises the workforce, excluding trainees, at the end of the reporting period (part-time employees have been converted to full-time equivalents) .

56 SEGMENT INFORMATION ACCORDING TO SEGMENTS

Segment information according to segments

DB Netze DB Netze DB Netze Subsidiaries/ Sum of DB Group DB Long-Distance DB Regional DB Arriva DB Cargo DB Schenker Track Stations Energy Other 1) segments Consolidation adjusted Reconciliation 2) DB Group

Æ Jan 1 to Jun 30 or respectively as of Jun 30 [€ million] 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 External revenues 2,028 1,932 4,254 4,223 2,659 2,526 2,150 2,154 8,072 7,400 746 694 273 267 654 591 234 246 21,070 20,033 – – 21,070 20,033 –4 0 21,066 20,033 Internal revenues 79 74 50 57 3 3 156 158 31 31 1,906 1,907 362 356 762 800 1,920 1,812 5,269 5,198 –5,269 –5,198 – – – – – – Total revenues 2,107 2,006 4,304 4,280 2,662 2,529 2,306 2,312 8,103 7,431 2,652 2,601 635 623 1,416 1,391 2,154 2,058 26,339 25,231 –5,269 –5,198 21,070 20,033 –4 – 21,066 20,033 Other external income 69 80 102 128 129 87 108 114 97 89 323 325 62 50 107 9 235 225 1,232 1,107 – – 1,232 1,107 7 1 1,239 1,108 Other internal income 53 27 89 41 0 2 49 21 3 3 107 91 9 8 –88 14 492 528 714 735 –714 –735 – – – – – – Changes in inventories and internally produced and capitalized assets 7 2 32 32 0 1 16 23 2 4 415 388 19 17 9 9 433 394 933 870 443 384 1,376 1,254 – – 1,376 1,254 Total income 2,236 2,115 4,527 4,481 2,791 2,619 2,479 2,470 8,205 7,527 3,497 3,405 725 698 1,444 1,423 3,314 3,205 29,218 27,943 –5,540 –5,549 23,678 22,394 3 1 23,681 22,395 Cost of materials –1,200 –1,235 –2,660 –2,617 –837 –731 –1,259 –1,243 –5,339 –4,782 –834 –812 –257 –239 –1,235 –1,196 –1,266 –1,210 –14,887 –14,065 4,491 4,505 –10,396 –9,560 –15 –4 –10,411 –9,564 Personnel expenses –470 –457 –966 –937 –1,215 –1,077 –818 –830 –1,580 –1,505 –1,358 –1,275 –154 –139 –60 –58 –1,528 –1,507 –8,149 –7,785 1 –3 –8,148 –7,788 –79 –1 –8,227 –7,789 Other operating expenses –238 –239 –267 –276 –501 –579 –320 –358 –981 –946 –490 –480 –97 –93 –70 –71 –633 –640 –3,597 –3,682 1,037 1,051 –2,560 –2,631 –2 –1 –2,562 –2,632 EBITDA 328 184 634 651 238 232 82 39 305 294 815 838 217 227 79 98 –113 –152 2,585 2,411 –11 4 2,574 2,415 –93 –5 2,481 2,410 Scheduled depreciation 3) –112 –130 –319 –316 –128 –126 –104 –92 –97 –94 –426 –444 –67 –68 –35 –35 –122 –129 –1,410 –1,434 22 23 –1,388 –1,411 –38 –49 –1,426 –1,460 Impairment losses recognized/reversed 3) 0 0 –1 –1 0 0 –6 0 0 0 0 4 0 0 0 0 0 0 –7 3 – – –7 3 28 – 21 3 EBIT (operating profit) 216 54 314 334 110 106 –28 –53 208 200 389 398 150 159 44 63 –235 –281 1,168 980 11 27 1,179 1,007 –103 –54 1,076 953 Net operating interest 4) 5 –1 –21 –27 –14 –15 –24 –30 –18 –18 –139 –127 –20 –19 –7 –8 –94 –128 –332 –373 – – –332 –373 – – – – Operating income after interest 4) 221 53 293 307 96 91 –52 –83 190 182 250 271 130 140 37 55 –329 –409 836 607 11 27 847 634 – – – –

Property, plant and equipment 2,117 1,879 6,586 6,594 2,128 2,049 2,224 2,237 1,415 1,435 19,837 20,132 3,201 3,210 972 1,002 1,150 982 39,630 39,520 –689 –677 38,941 38,843 – – 38,941 38,843 Intangible assets 6 1 19 17 1,719 1,809 131 1 1,434 1,484 133 134 8 4 35 55 69 55 3,554 3,560 13 – 3,567 3,560 – – 3,567 3,560 thereof goodwill 0 0 4 6 1,388 1,436 – 0 1,135 1,188 – 0 0 0 – 0 14 13 2,541 2,643 22 – 2,563 2,643 – – 2,563 2,643 Inventories 82 77 168 163 92 86 95 88 69 64 176 161 0 – 39 18 488 417 1,209 1,074 –34 –18 1,175 1,056 – – 1,175 1,056 Trade receivables 222 258 630 566 333 322 577 551 2,335 2,325 321 316 50 26 158 293 636 674 5,262 5,331 –896 –1,119 4,366 4,212 – – 4,366 4,212 Receivables and other assets 1,071 1,055 321 375 959 495 94 112 828 1,102 183 52 13 13 26 98 19,516 17,613 23,011 20,915 –20,431 –19,313 2,580 1,602 – – 2,580 1,602 Receivables from financing –1,017 –1,043 –49 –175 –224 –133 –6 –19 –271 –638 –1 –2 0 – 160 –52 –18,797 –16,968 –20,205 –19,030 20,066 18,929 –139 –101 – – –139 –101 Income tax receivables – – 0 0 19 20 2 2 16 26 0 0 – – 0 – 8 9 45 57 – – 45 57 – – 45 57 Available-for-sale assets – – – – – – 0 0 – – – – – – – – – – 0 0 – – 0 0 – – 0 0 Trade liabilities –245 –254 –593 –718 –530 –446 –491 –534 –1,905 –1,749 –1,084 –663 –98 –98 –286 –284 –857 –831 –6,089 –5,577 885 1,110 –5,204 –4,467 – – –5,204 –4,467 Miscellaneous and other liabilities –309 –262 –383 –472 –411 –519 –399 –374 –853 –765 –694 –997 –122 –129 –88 –131 –804 –786 –4,063 –4,435 372 392 –3,691 –4,043 – – –3,691 –4,043 Income tax liabilities 0 – 0 0 –83 –87 –4 –5 –72 –73 – – –1 –1 – – –18 –36 –178 –202 20 28 –158 –174 – – –158 –174 Other provisions –66 –73 –1,233 –1,241 –155 –180 –284 –171 –381 –461 –356 –366 –55 –53 –66 –17 –2,322 –2,614 –4,918 –5,176 –21 –44 –4,939 –5,220 – – –4,939 –5,220 Deferred items –392 –357 –142 –131 –406 –206 –7 –8 –17 –15 –735 –878 –137 –143 –3 –4 –124 –122 –1,963 –1,864 1 1 –1,962 –1,863 – – –1,962 –1,863 Capital employed 5) 1,469 1,281 5,324 4,978 3,441 3,210 1,932 1,880 2,598 2,735 17,780 17,889 2,859 2,829 947 978 –1,055 –1,607 35,295 34,173 –714 –711 34,581 33,462 – – 34,581 33,462

Net financial debt –1,020 –1,034 2,671 2,462 886 574 1,410 1,433 917 180 10,092 10,224 1,215 1,175 445 254 2,414 2,891 19,030 18,159 – – 19,030 18,159 – – 19,030 18,159

Investments accounted for using the equity method 0 0 4 5 141 133 27 27 13 15 1 1 – – 0 – 351 353 537 534 – – 537 534 – – 537 534 Result from investments accounted for using the equity method 0 0 0 1 9 12 1 1 1 0 0 0 – – – – 3 3 14 17 – – 14 17 – – 14 17

Gross capital expenditures 215 156 164 137 184 127 110 52 76 72 2,907 2,495 253 182 48 49 139 169 4,096 3,439 12 33 4,108 3,472 – – 4,108 3,472 Investment grants received – – –30 –2 – 0 –2 –2 – – –2,382 –1,980 –173 –113 –31 –29 0 0 –2,618 –2,126 – – –2,618 –2,126 – – –2,618 –2,126 Net capital expenditures 215 156 134 135 184 127 108 50 76 72 525 515 80 69 17 20 139 169 1,478 1,313 12 33 1,490 1,346 – – 1,490 1,346 Additions due to changes in the scope of consolidation 0 – – – 4 – – – 0 17 – – – – – – – – 4 17 – – 4 17 – – 4 17

Employees 6) 16,301 16,443 35,631 35,957 54,145 51,618 28,964 30,155 69,370 66,822 44,717 43,948 5,404 5,007 1,742 1,756 51,291 50,986 307,565 302,692 – – 307,565 302,692 – – 307,565 302,692

1) Previous year’s figures adjusted due to the separation of DB Netze Energy. 2) Relating to special items and reclassification PPA amortization of customer contracts.. 3) The non-cash items are included in the segment result shown. 4) Key figure from internal reporting, no external figures. 5) Profit transfer agreements were not assigned to segment assets or liabilities. 6) The number of employees comprises the workforce, excluding trainees, at the end of the reporting period (part-time employees have been converted to full-time equivalents) .

57 Deutsche Bahn Group – Interim Report January – June 2017 CONSOLIDATED INTERIM FINANCIAL STATEMENTS

≈≈ Information by regions

External Non-current Capital Gross capital Net capital Employees 1) revenues assets 1) employed 1) expenditures expenditures (FTE)

Æ Jan 1 to Jun 30 [€ million] 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Germany 11,850 11,484 36,253 36,024 28,943 27,682 3,832 3,229 1,214 1,104 188,132 187,476 Europe (excl. Germany) 6,669 6,360 5,986 6,044 5,310 5,450 247 197 247 196 92,703 89,952 Asia/Pacific 1,404 1,230 778 799 780 773 11 7 11 7 15,180 14,371 North America 878 734 203 216 277 269 4 4 4 4 8,662 8,277 Rest of world 269 225 28 26 27 26 2 2 2 2 2,888 2,616 Consolidation – – –698 –678 –756 –738 12 33 12 33 – – DB Group adjusted 21,070 20,033 42,550 42,431 34,581 33,462 4,108 3,472 1,490 1,346 307,565 302,692 Reconciliation –4 0 – – – – – – – – – – Total 21,066 20,033 42,550 42,431 34,581 33,462 4,108 3,472 1,490 1,346 307,565 302,692

1) As of Jun 30.

Notes to the consolidated interim financial statements

≈≈ Basic principles and methods ≈≈ Changes in DB Group Movements in the scope of consolidation of DB Group are detailed in the The unaudited, short-form interim financial statements for the period following: ending June 30, 2017, are prepared in accordance with the International Financial Reporting Standards (IFRS) as applied in the EU and their inter- Ger-­ For-­ ­ma­n eign Total Total Total pretation by the IFRS Interpretations Committee (IFRIC). The require- as of as of as of as of as of ments of International Accounting Standard (IAS) 34 (Interim Financial Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Reporting) were followed. The accounting policies underlying the con- Æ [Number] 2017 2017 2017 2016 2016 solidated financial statements 2016 have been consistently applied for FULLY CONSOLIDATED SUBSIDIARIES these interim financial statements. As of Jan 1 128 490 618 632 632 No new material IAS/IFRS standards, interpretations and amendments Additions 1 3 4 11 28 mandatory for Deutsche Bahn Group (DB Group) need to be applied Additions due to changes during the reporting period. in type of inclusion 0 0 0 0 0 Disposals 1 13 14 14 42 Disposals due to changes ≈≈ Changes to the segment allocation in type of inclusion 0 0 0 0 0 In 2016, the DB Netze Energy segment was removed from the Subsid- Total 128 480 608 629 618 iaries/Other segment and reported separately on the basis of internal reporting. Additions of companies and parts of companies On January 1, 2017, two companies that had previously been allo- During the reporting period, DB Group acquired the following companies cated to the DB Schenker segment were allocated to the Subsidiaries/ or parts of companies under IFRS 3: Other segment. The previous-year figures were not adjusted due to immateriality. Area of Companies/parts of companies activity Segment International Overseas Cargo LLC, Doha/Qatar, freight- now operating under forwarding From Jan 1, 2017: Schenker Logistics W.L.L. services DB Schenker Business operations in Spain (acquisition of buses, concessions, and licenses as well as From Jun 1, 2017: transfer of employees) Bus service DB Arriva

In total, the acquisitions (net payment of € 7 million) are immaterial from DB Groupʼs point of view.

58 Notes to the consolidated interim financial statements

Disposals of companies and parts of companies ≈≈ Contingent receivables, liabilities The disposals from the scope of consolidation include eight mergers, five and guarantee obligations liquidations and one sale. The sale resulted in a cash inflow of € 4 million. Contingent receivables amounted to € 18 million as of June 30, 2017 (as Effects on the consolidated statement of income of December 31, 2016: € 17 million; as of June 30, 2016: € 20 million) and The following table summarizes the non-material effects on the consol- mainly comprise a claim for a refund of investment grants which had idated income statement resulting from the changes in the scope of been paid; however, as of the balance sheet date, the extent and due consolidation which have taken place compared with the respective date of the claim were not sufficiently certain. previous year period: As of the balance sheet date, no contingent receivables were recog- nized for any ongoing proceedings due to the great uncertainty sur- thereof Amounts for rounding reimbursement claims, timing and likelihood. from addi- removals The contingent liabilities are broken down as follows: tions to from the scope the scope DB Group of consoli- of consoli- Jun 30, Dec 31, Jun 30, Æ [€ million] H 1 2017 dation dation Æ [€ million] 2017 2016 2016 Revenues 21,066 29 –12 Contingent liabilities from Inventory changes and internally produced issuing and transferring bills – 0 3 and capitalized assets 1,376 1 – Guarantee obligations 30 – – Overall performance 22,442 30 –12 Other contingent liabilities 93 95 88 Other operating income 1,239 1 –1 Total 123 95 91 Cost of materials –10,411 –16 3 Personnel expenses –8,227 –9 6 Other contingent liabilities also comprise risks arising from litigation Scheduled depreciation and impairments –1,405 –2 1 which had not been stated as provisions because the expected proba- Other operating expenses –2,562 –4 2 bility of occurrence is less than 50%. Operating profit EBIT( ) 1,076 0 –1 Result of investments accounted for using There are also contingencies of € 18 million from guarantees as of the equity method 14 – – June 30, 2017 (as of December 31, 2016: € 29 million; as of June 30, 2016: Net interest income –343 0 – € 33 million). Property, plant and equipment with carrying amounts of Other financial result –14 0 – € 2 million (as of December 31, 2016: € 9 million; as of June 30, 2016: Financial result –343 0 0 € 5 million) were also used as security for loans. The reported figure Profit before taxes on income 733 0 –1 essentially relates to buses which are in use at the operating companies Taxes on income 46 0 – in the DB Arriva segment. Net profit (after taxes) 779 0 –1 DB Group acts as guarantor mainly for equity participations and joint ventures, and is subject to joint and several liability for all syndicates in Of the revenues of € 29 million resulting from additions to the scope of which it is involved. consolidation, € 9 million are attributable to Overseas Cargo LLC (now operating under Schenker Logistics W.L.L.), Doha/Qatar, € 9 million to ≈≈ Information regarding the fair value CSAD MHD Kladno a.s., Kladno/Czech Republic, acquired in 2016, and of financial instruments KD SERVIS a.s., Kladno/Czech Republic, € 6 million to SAVDA Autoservizi Valle dʼAosta S.p.A., Aosta/Italy, acquired in 2016, € 4 million to Red- The carrying amounts of the cash and cash equivalents, trade receiv- head, acquired in 2016, and € 1 million to Autos Carballo, S.L., San ables and other financial assets (€ 6,075 million) approximate the fair Vicente de A Bana/Spain, acquired in 2016. values as of the balance sheet date. The carrying amounts of the trade accounts, the other and miscel- laneous financial liabilities (a total of € 6,675 million) as well as the short- term financial debt approximate the fair values as of the balance sheet date. As of June 30, 2017, € 871 million of the receivables and other assets are allocated to non-financial assets (as of December 31, 2016: € 793 mil- lion; as of June 30, 2016: € 587 million). As of June 30, 2017, € 2,220 million of the other liabilities are allocated to non-financial liabilities (as of December 31, 2016: € 2,132 million; as of June 30, 2016: € 2,170 million). The fair value of the non-current financial debt amounted to € 20,018 million as of June 30, 2017 (as of December 31, 2016: € 22,089 mil- lion; as of June 30, 2016: € 21,994 million).

59 Deutsche Bahn Group – Interim Report January – June 2017 CONSOLIDATED INTERIM FINANCIAL STATEMENTS

≈≈ Other financial obligations ≈≈ Other disclosures

The other financial obligations amounted to € 21,747 million as of June 30, ≈≈ Bond issues and redemptions 2017 (as of December 31, 2016: € 21,325 million; as of June 30, 2016: Deutsche Bahn Finance B.V. (DB Finance), Amsterdam/the Netherlands, € 22,230 million). issued the following bonds in the first half of 2017: Capital expenditures in relation to which the company has entered into contractual obligations as of the balance sheet date, but for which Issue volume Term (years) Coupon (%) Placement no consideration has yet been received, are broken down as follows: Institutional NOK 700 million investor in (about € 79 million) 15 2.49 Scandinavia Jun 30, Dec 31, Jun 30, Institutional Æ [€ million] 2017 2016 2016 investors, Order commitments to acquire particularly in Property, plant, and equipment 15,926 15,272 16,314 € 500 million 15.5 1.5 Europe Intangible assets 35 13 12 Institutional investors, Purchase of financial assets 430 438 433 GBP 300 million particularly in Total 16,391 15,723 16,759 (about € 341 million) 8 1.375 Great Britain

The increase in order commitments in property, plant and equipment is In the same period, a € 500 million bond issued by DB Finance was particularly affected by the planned capital expenditure projects due to redeemed at maturity. own construction projects; this was counteracted by the completed pur- DB Group received the proceeds from the GBP 300 million bond in chases of new vehicles. In the case of some supply arrangements, there July 2017. are independent admissions of guilt with regard to fulfilling the order commitment; these are opposed by claims of the same amount, backed ≈≈ Dividend payments by bank guarantees and insurance policies with maximum creditworthi- ness. Order commitments to acquire property, plant and equipment Pursuant to the resolution of the Annual General Meeting of March 22, include future obligations for vehicles in connection with the transport 2017, DB AG paid a profit distribution of € 600 million to the Federal contracts that must be accounted for in accordance with IFRIC 12. Government. The purchase of financial assets relates to outstanding contributions at the European Company for the Financing of Railroad Rolling Stock ≈≈ Number of issued shares (EUROFIMA), Basel/Switzerland. Other financial obligations relate to future minimum lease payments The number of issued shares is unchanged at 430,000,000. arising from operating lease agreements. ≈≈ Major events after the ≈≈ Related-party disclosures balance sheet date

Major economic relations between DB Group and the Federal Republic ≈≈ Bond issue of Germany (Federal Government) relate to liabilities due to the Federal In July 2017, DB Group issued an additional bond with a total volume of Government arising from loans which have been extended (present SEK 530 million (about € 55 million) through DB Finance. The bond has value: € 992 million; as of December 31, 2016: € 1,172 million; as of June 30, a duration of 15 years, has a coupon of 2.2%, and was placed with insti- 2016: € 1,146 million). There are also relations arising from the fees paid tutional investors in South Korea. to the Federal Government within the framework of pro forma billing for the assigned civil servants as well as cost refunds for the secondment of ≈≈ Law on collective bargaining business relationship service provision personnel as well as from invest- On July 11, 2017, the German Federal Constitutional Court largely ment grants which have been received. The guarantees received from rejected the lawsuits of several trade unions against the law on collec- the Federal Government primarily relate to the loans received from tive bargaining. EUROFIMA as well as the outstanding contributions and liabilities arising from collective liability of Deutsche Bahn AG (DB AG) at EUROFIMA. ≈≈ Transport contract in the Netherlands Business relations with Deutsche Telekom and Deutsche Post In July 2017, DB Arriva won a competitive tender in the Netherlands to regarding the use of telecommunications and postal services have taken operate the regional rail transport in Groningen and Friesland for an place to the usual extent. additional 15 years.

Berlin, July 20, 2017

Deutsche Bahn Aktiengesellschaft The Management Board

60 ≈≈ Contact information ≈≈ Financial calendar

≈≈ Investor Relations ≈≈ March 22, 2018 Deutsche Bahn AG Annual Results Press Conference, Investor Relations Publication of the 2017 Integrated Report Europaplatz 1 10557 Berlin ≈≈ July 25, 2018 Germany Interim Results Press Conference, Phone: +49-30-297-6 40 31 Publication of the Interim Report January – June 2018 Fax: +49-69-265-2 01 10 E-mail: ir @ deutschebahn.com Internet: www.db.de/ir-e

This Interim Report was published on July 26, 2017 (copy deadline: July 21, 2017) and is available online at www.db.de/zb-e. The Interim and Integrated Reports of Deutsche Bahn Group as well as the Financial Statements of Deutsche Bahn AG are published in German and English. Imprint The Interim and Integrated Reports of Deutsche Bahn Group, the ◊◊ Edited by: Deutsche Bahn AG, Investor Relations, Berlin Financial Statements of Deutsche Bahn AG, the Annual ◊◊ Design and typesetting: Studio Delhi, Report of DB Fernverkehr AG, DB Regio AG, DB Station& ◊◊ Proofreading: AdverTEXT, Düsseldorf Service AG and DB Netz AG, and up-to-date information ◊◊ Lithography: Koch. Prepress Print Media GmbH, Wiesbaden are also available on the Internet. ◊◊ Printing: Kunst- und Werbedruck, Bad Oeynhausen ◊◊ Photography and consulting: Max Lautenschläger, Berlin ≈≈ Corporate Communications ◊◊ Photo credits: Cover page: Max Lautenschläger Corporate publications and the Competition Report are available online ◊ Page 1: Max Lautenschläger or can be requested from Corporate Communications: Deutsche Bahn AG Corporate Communications Potsdamer Platz 2 10785 Berlin Germany Phone: +49-30-297-6 10 30 Fax: +49-30-297-6 19 19 E-mail: presse @ deutschebahn.com Internet: www.db.de/en/presse

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